Author: Nicholas Benes

Outside Director Lessons #2: My First Experience as an Outside Director

2023-10-16 posted by 1 Comment

Why do I think director training is so important to Japan’s future? Because I have seen so much of what goes wrong behind the scenes, and the losses and pain that are caused, when boards do not function well here. I have a lot of “scar tissue”, as we say in English.  What is really interesting, is how many commonalities there are in the causes for inadequate governance.  The size of the company, and its industry, really do not seem to matter. It is the reverse of Tolstoy’s quote, as if “all Japanese boards that succeed do so in a different way, but all boards that fail, do so in the same way”  If so, one would think this should make it easier to avoid governance failures.

My first experience as an outside director in Japan began in the year 2000, when the M&A advisory boutique that I led at that time, JTP Corporation, advised the US firm of MapInfo to conclude a strategic alliance and invest in a 25% capital raise by Alps Mapping in Nagoya.  Alps (as it was known in Japanese) was an unlisted firm that was the third largest map publisher in Japan, and had excellent map data.  The company was planning to go public at some time in the future.  Because MapInfo had no staff in Japan at the time, I was nominated by MapInfo to serve on the board of Alps going forward, to protect not only its interests but also those of  other shareholders, because MapInfo had no staff in Japan at the time.

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Outside Director Lessons #1: Genesis of Director Training Nonprofit BDTI

2023-10-16 posted by
Nicholas Benes

On 4/16/2023 I became 67 years old. On this “occasion” I would like to ask you to consider donating to The Board Director Training Institute of Japan (BDTI), which I have led in offering director training in Japan for 13 years now, training about 3,000 persons in programs, and many more via e-Learning.  At the same time, going forward, I also will attempt to make a series of posts (on this discussion forum) a perspective or story related to corporate governance, based on recent events and my own 15 years of experience sitting on boards here, that will be light, easy reading but hopefully also be thought-provoking.

BDTI’s work is “missionary work” that requires passion and commitment. Perhaps these stories will be of interest in terms of revealing why I do what I do, the challenges that face Japan and its companies and investors, and how how they can be overcome.

Because Japan does not have a customary or mandatory requirement for serious director training, BDTI’s courses need to be “subsidized” in some way  so that we can offer high-quality programs at a price point that is low enough to attract our (overly frugal) customers, –that is to say, at prices that on a per-person-per-hour basis are one-third or less than in other developed markets.  (Even paying low salaries and donating a lot myself, this is the market reality). Moreover, “G” is the foundation on which the “house of ESG” is built, but that fact is not as widely recognized as it should be.

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Collaborative Engagement in the UK: Much More Active

2023-05-30 posted by

The 2022 report by the FRC in the UK, “The influence of the UK Stewardship Code 2020 on practice and reporting”, shows a stark contrast between the virtual absence of collective engagement in Japan as compared to the UK. A large proportion of asset managers in the UK are participating in a variety of collaborative engagements:

Some Quotes from the FRC’s report:

“Most respondents identified collaborative engagement (working with other investors) as an increasingly important escalation tool.”

“One of the things about collaboration is you don’t have to do all the work yourself. You are adding the value of your assets to the engagement and hopefully sending a better signal – that’s quite a lot of change in the sector in dealing with [ESG] issues.”  (Head of responsible investment, large UK asset owner)

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Director Skills in Japan: The Picture Worth 1,000 Words

2023-05-27 posted by

Take a look at the chart below, from materials recently published by the FSA’s Committee on the Stewardship Code and the Corporate Governance Code.  This is from an analysis of ALL directors (both executive and non-executive) at TSE1 firms that disclosed a skills matrix in 2019.  From left to right, the categories are: a) technology; b) finance and/or accounting; c) executive management experience; and d) global (international) experience.  Can you guess which country is the dark blue bar?  Yep, that low guy is Japan. Right across the board.

Director skill gaps in Japan - BDTI

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Taro Kono, Could You Please Speak to the FSA and TSE?

2023-05-27 posted by
TSE-ガバナンス報告書の開示項目問題

The FSA and TSE have been assiduous in encouraging more engagement between investors and Japanese companies, and in highlighting the problems raised by the ever-increasing share of funds invested on a passive basis in the Japanese market – which is leading to a sort of “hollowing out” of meaningful feedback from institutional investors.  I would encourage anyone who reads Japanese to read the most recent Action Plan for corporate governance, especially including the reports by the Secretariat in the FSA’s May 16th meeting.  This is very commendable.

On the other hand, there is a stark contradiction between this stance and a big defect in the machine-readability of the Corporate Governance Reports (CG Reports)  submitted by Japanese companies to the JPX/TSE, which is regulated by the FSA . The defect renders a major portion of these reports almost entirely useless for rigorous analysis by computers… even though I pointed  it out some six years ago. In a word, the 11 (or more) different “disclosure items” required to included in CG Reports, which account for close to half of the meaningful information in each report, are all mashed together into one XBRL “barrel” that does not even have a standardized format.

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Questions to Ask When Engaging with Japanese Firms

2023-05-08 posted by
Questions to Ask in Engagement

The recent focus on ESG has allowed certain firms to de-focus on “G” and appeal to all sorts of “ES” policies and plans in their IR materials.  This makes the job of investors harder in the sense that true sustainability and better financial performance are less likely to occur without good G in the first place, so one has to separate out the companies which are truly improving the quality of their governance in terms of its substance rather then just superficially assembling all the right boxes in the chart.

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New Donors: A Foreign Institute of Directors, Eight Individuals!

2023-04-16 posted by

Yesterday I made a request below for donations to BDTI, on the occasion of my birthday. The results were: 1) one significant donation from the Swiss Institute of Directors; 2) one donation from an American in California, and one from a Canadian living in Guam; 3) four promises to donate from foreigners living in Japan; and 4) two donations from a Japanese person. Thank you to the supportive donors! … and thanks for the “likes”! 

“On April 16th, 2023 I will be 67 years old. On this “occasion” I would like to ask you to consider donating to The Board Director Training Institute of Japan (BDTI), which I have led in offering director training in Japan for 13 years now, training more than 2,700 persons in programs, and many more via e-Learning. At the same time, going forward, I also will make a series of posts (on this discussion forum) giving a perspective or story related to corporate governance, based on recent events and/or my own 15 years of experience sitting on boards here, that will be light, easy reading but hopefully also be thought-provoking.

BDTI’s work is “missionary work” that requires passion and commitment. Perhaps these stories will be of interest in terms of revealing why I do what I do, the challenges that face Japan and its companies and investors, and how they can be overcome. This will be from the point of view of someone who has sat on boards here for almost 15 years, and has been an active advocate for better corporate governance for more than 20 years.

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Public Comment to METI’s Fair Acquisition Study Group

2023-03-25 posted by
Questions to Ask in Engagement

As an individual and not representing any organization, I submitted the public comment attached below to METI’s Fair Acquisition Study Group.
Nicholas Benes – Public Comment to the METI Fair Acquisition Study Group-03.15.2023

My conclusion:

” Instead, I believe that the study group should seriously consider proposing that Japan adopt the UK model for takeovers and similar transfers of control or substantial influence, and the UK’s rules for collective engagement. These rules fit much better with Japan’s systemic and corporate governance realities. Were this to be done, the following policies should be implemented:

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Letter to Prime Minister Fumio Kishida from Nicholas Benes on New Capitalism

2022-09-11 posted by
Nicholas Benes

September 2, 2022

Nicholas Edward Benes
(Writing as an individual. Please see below.)
Setagaya-ku, Tokyo
benesjp22@gmail.com
(Please feel free to email me to receive a PDF copy of this letter.) 

Prime Minister Fumio Kishida
Prime Minister’s Residence
2-chōme-3-1 Nagatachō
Chiyoda-ku, Tokyo 100-0014

cc:
Deputy Chief Cabinet Secretary Seiji Kihara
Mr. Masahiko Shibayama, Deputy Chairperson, Election Strategy Committee of the LDP
Hon. Prime Minister,

I am writing this letter with the respect that is due you as the foremost leader of this country, who has set forth a concept for “a new form of capitalism.” If I may, I would like to share my concrete thoughts on how further improving corporate governance in Japan can be a positive game-changer for Japan’s economy, society, and financial markets.

When I saw your moving speech to the NPT Review Conference, I was impressed how fluently you read English. Therefore, I am taking the liberty to write this letter in English, attaching a Japanese translation. As the person who suggested to the US government that President Obama visit Hiroshima, I was pleased with your passionate comments.

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How to Revive Japan’s Economy

2022-04-30 posted by

To Those Who Agree with BDTI’s Mission to Improve Governance In Japan

The Board Director Training Institute of Japan (BDTI) is the most influential provider of director training and data on corporate governance in Japan. I am pleased to share this report on the growth of our activities during FY2021 (please click). Notably, more than 32% of our participants in non-corporate programs were women.

While our training activity has increased, we are still dependent on donations from foreign investors for our survival so that we may continue to make an outsized impact in improving corporate governance in Japan. For the past few years, I have reduced my own salary to a minimal level to make this possible. (In fact, over the past 12 years, after subtracting my own donations to BDTI, I have literally worked for zero compensation.)

BDTI is regulated by the Japanese government. I intentionally created BDTI in 2009 as a non-profit and later obtained special government certification that its director training activities serve the “public interest”, to create the most eminently “supportable” platform for spreading governance best practices and the custom of director training in Japan. Especially after I proposed the Corporate Governance Code to the government in 2013 (which requires director training), I believed that this format would make it easy for Japanese institutional investors to support our activities, in view of their responsibilities under the Stewardship Code and their proclaimed dedication to ESG and sustainability. After all, the quality of “G” (the board) is the pillar that ensures whether “E” and “S” will create value for shareholders, stakeholders, and society over the long term, rather than simply as reactive PR.

However, during the past 12 years, not a single large Japanese investing institution has supported BDTI or cooperated with our activities in any way, despite many meetings. Instead, 99% of BDTI’s donations have come from foreign asset managers and institutions, including some of the most respected investing organizations in the world.

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