Month: November 2018

ICGN Urges Japan to Focus More on Independent Committees and Director Training, Other Key Areas

2018-11-30 posted by

We are pleased to note that against the backdrop of the recent events at Nissan, the Institutional Corporate Governance Network (ICGN)  has submitted a letter to Japan’s Council of Experts for the Follow-up of Japan’s Stewardship Code and Corporate Governance Code, stressing the importance of independent directors, independent board committees, director training, use of a “skills matrix”, capital allocation, disclosures, and a number of other issues that BDTI has been stressing for many years,  – ever since its establishment in 2009, in fact.   On the topic of director training, Kerrie Waring of the ICGN wrote:

” ICGN encourages the introduction of high quality training for independent directors in Japan to help build an understanding of what their role entails, particularly in relation to monitoring management and public disclosures. This would help ensure objective decision-making in response to business issues and in alignment with the company’s vision, mission and strategy. We also stress the importance of financial literacy to ensure that independent directors are able to challenge management on issues such as capital efficiency, the use of cross shareholdings and CEO remuneration.”  (emphasis added) 

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November 22nd “Director Boot Camp” – Another Successful Program! Next Course: February 12th, 2019!

2018-11-26 posted by

On November 22nd, BDTI held its English Director Boot Camp , attended by a number of highly experienced participants. Participants from various companies heard lectures about corporate governance by Nicholas Benes, and exchanged experiences and opinions at a spacious, comfortable room kindly donated for our use by Cosmo Public Relations, a leading communications and PR firm in Tokyo.

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Letter from a Person Who is Concerned about the Nissan Affair:  a View from the Inside of Another Company

2018-11-20 posted by

As you might imagine I have been besieged by inquiries from the press when I have little knowledge of what is going on, or went on, a Nissan.  I also received this spontaneous email from a friend who is concerned about the Nissan-Ghosn affair.  Having “sanitized” it, with permission I am posting it.  This particular person worked in matters related to legal compliance for 10 years at a major Japanese company.

Dear Mr Benes:

I retired nine months ago ago and after a long vacation, recently I have finally got around to looking for an outside director or other similar position.

Anyway, I wanted to write because I was floored by the whole Ghosn spectacle.  I am not close to that company, but was astounded that they chose to turn over and have arrested two foreign senior staff (Chairman and his aide) for redirecting assets to his own account “over several years.”  I was floored because:

a) Neither of them is likely that spiffy at Japanese and would need other staff to prepare the transactions for them.  Indeed even had they been Japanese staff themselves this would have required a certain amount of nemawashi at least the way the companies I am familiar with are now run.  Gone are the days when 10,000 here and 100,000 there can be disbursed at some executive’s personal discretion…..

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How Many Shares are Actually Held by “Allegiant Shareholders [1]”?

2018-11-17 posted by 1 Comment

By Ken Hokugo[2]
Director, Head of Corporate Governance, Pension Fund Association
Director, The Board Director Training Institute of Japan

There has always been confusion surrounding this topic.  From the point of view of those who want to help foreign investors understand the realities of the Japanese market, the most troubling number that is thrown about is the seemingly magic number of “10% or less”.   This number is frequently referred to by the media, with the source given as being the reports by a certain analyst at a research institute that is affiliated with a prominent securities firm.

Quite often, we encounter foreign investors who casually believe this widely-touted number of “10% or less” and therefore are not concerned very much (if at all) with the issue of “cross-shareholdings”  in Japan, in light of recent improvements in Japan’s corporate governance.  Needless to say, it takes a lot of energy to convince such investors that the reality of the Japanese market is different.  In this post, I am not trying to scare foreign investors away from Japan’s stock markets, but rather trying to encourage them to invest based on an accurate understanding of the situation in the context of history, culture, and the overall current environment.

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Three Years of Policy Advocacy Worked! Now Five Non-Financial Corporate Pension Funds in Japan Have Signed the Stewardship Code

2018-11-16 posted by

I was very pleased to see in the FSA’s updated list of signatories to the Stewardship Code, that Mitsubishi Corporation’s pension fund recently signed on.  This makes five major non-financial corporate pension funds that have signed the S.C.:  Secom, Panasonic, NTT, Eisai, and now Mitsubishi Corporation. Secom had signed from the start, but the others came after I urged the Prime Minister on this topic, and then the Minister of Health, Labour and Welfare (MHLW, in charge of corporate pensions), then wrote a proposal for a change of the regulations by MHLW…. which resulted in a joint study group between MHLW, the Pension Fund Association, pension experts, and the FSA (as observer) for the express purpose of encouraging pension funds to sign the S.C.

https://www.fsa.go.jp/en/refer/councils/stewardship/20181115/en_list_02.pdf 

This major progress for Japan, and these companies should be commended. There is an extreme disconnect between the way in which Japanese companies claim to care about their employees (and often do! ) but so far, have not seemed to care about the assets (retirement funds) of those same employees.  This is especially so when one considers that corporate pensions in Japan have no government guarantee, so as the company veers towards bankruptcy it first forces employees to agree to a big cut in benefits (a la JAL), and if it goes bankrupt and the pension is underfunded….well, “it is what it is”.

If anyone is interested, here is the “comply and explain” proposal that I submitted to the MHLW.
https://bdti.or.jp/2016/08/20/pengovrprop/ 

Nicholas Benes
Representative Director, BDTI

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Corporate Governance of Japan – Linkage Between CG and Value Creation (October 2018)

2018-11-16 posted by

BDTI/METRICAL updated their research series on “Corporate Governance in Japan – Linkage Between CG and Value Creation” as of October 2018. The joint research has analyzed how board practice criteria and action criteria statistically correlate with value creation measures such as ROA, ROE and Tobin’s Q.  An increasing number of criteria or factors of CG show statistically significant correlation with ROE, ROA and Tobin’s Q.  Also, the analysis of the correlation between the percentage of INEDs and the performance measures revealed a J-curve relationship (layered structured, in three groups).  We will keep a close eye on how board practice and actions impact on performance.

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