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On July 27th, BDTI sent this letter to senior persons at Japan’s largest asset managers, asking for a dialogue and cooperation to improve Japanese boards via training, engagement, and data. Right now, we have fruitful dialogues with the many foreign institutional investors who are the source of 99% of donations to BDTI, or purchase our data, but very few dialogues with Japanese large investors. They could probably benefit from what we have learned providing director training to 2,500 persons over the past 11 years, and from what my colleagues and I have learned serving as independent directors for many years…. given that most fund managers have never sat on a board. We sent out letters like this last year, but received no responses. We will let you know what the result is this year; what kind of firms responded (if any) vs. not. （Note: the letter below is a translation from the original Japanese. )
Mr. /Ms. XXXX
I am Nicholas Benes, Representative Director of the Board of Directors Training Institute (BDTI).
Since its establishment in 2009, BDTI has provided director and pre-director training, and has analyzed data on the status of corporate governance at listed companies, with the aim of improving governance in Japan.
Today, I would like to ask for your help in improving the quality of boards in Japan. This is something which will lead to the greater attractiveness of the Japanese stock market, which is the source of your firm’s profits. I have contacted you because I believe that we are both striving towards this common goal.
============================= July 27, 2022
Mr. Mark Zuckerberg
1 Hacker Way
Menlo Park, California
CC: copies also sent to
Director of Communications
Director of Fundraising Activities Team
Board of Director members via Corporate Secretary
Dear Mr. Zuckerberg,
The Board Director Training Institute of Japan (BDTI), which I lead from here in Tokyo, is a “public interest” nonprofit certified as such by the Japanese government. We provide: 1) training about directorship and corporate governance in Japan; 2) analysis and information dissemination about corporate governance; and 3) structured long-term big data taken from three separate types of disclosure reports in Japan. These are our major activities as approved by Japan’s Cabinet Office.
This webinar explores how in Japan there was no traditional role of “General Counsel” (GC), in Japanese companies. However, as Japanese companies have expanded and globalized, more of them are realizing that it is essential to have an actual licensed attorney serve as the “Chief Legal Officer” (CLO), serving a broader, more senior, and influential role.
BDTI’s own Nicholas Benes interviews the well-known Larry Bates, who recently stepped down from his role as Panasonic’s first General Counsel. During the past 30 years, Larry has served as General Counsel at three different companies, all of which operated in a global legal context. To provide actionable advice and perspectives to Japanese companies, the interview focuses on key issues such as: “What should be the GC’s role and mission, and how does the concept of “GC” differ from the traditional Japanese model?” and “What are the pros and cons of having the GC sit on the board and what is his or her relationship with the board and other executives?” – among other questions.
Included is a short panel discussion with other experienced legal advisors and independent directors at global companies. Larry Bates is joined by Chika Hirata, currently Regional Head of Ethics and Compliance at Takeda, and the former CLO and Corporate Secretary at MetLife Japan; and by Yumiko Ito of Ito Law Office, who also serves as an independent director for Kobe Steel, Ltd. and as an independent corporate auditor for Santen Pharmaceutical, Co., Ltd., and has served as General Counsel at Sharp Corporation, GE Medical Systems Japan, and Microsoft Japan.
This article (letter to the Tokyo Stock Exchange (cc: portfolio companies) is posted by BDTI on behalf of Yuya Shimizu, Hibiki Path Advisors Pte. Ltd. **************************************************************************** [English translation of a letter sent by Hibiki Path Advisors to Tokyo Stock Exchange] To: Yamaji Hiromi, President & CEO 2-1 Nihombashi Kabutocho, Chuo-ku Tokyo 103-8220 Japan Tokyo Stock […]
GoToData Dashboard’s screening tool shows us that only 75% (1464) of all TSE1 firms have nom + com committees, but only 842 of them are chaired by outside directors. At only 51 of those firms does an outside director serve as chair of the board, and 44 firms in that group have at least one female board member. Below, read more of the interesting results from this demonstration of the screening tool.
In Japan, traditionally there was no role of “General Counsel” (GC), the senior in-house counsel/lawyer, who sometimes sits on the board. Instead, until recently the standard model was that companies had a “Legal Department” led by a general manager who normally was not a licensed lawyer, and therefore had less to “lose” if he failed to give proper advice or transgressed ethical and other rules set by the Bar Association. However, as Japanese companies have expanded and globalized, more of them are realizing that it is essential to have an actual licensed attorney serve as the “Chief Legal Officer” (CLO), serving a broader, more senior, and influential role.
In this webinar, BDTI’s Nicholas Benes will interview the well-known Larry Bates, who recently stepped down from his role as Panasonic’s first General Counsel and will retire as a director in June of this year. During the past 30 years, Larry has served as General Counsel for 30 years at five different companies, all of which operated in a global legal context. To provide actionable advice and perspectives to Japanese companies, the interview will focus on key issues such as: (a) what should be the GC’s role and mission, and how does the concept of “GC” differ from the traditional Japanese model? (b) should that role include “corporate secretary” duties, or should the two roles be kept separate? (c) what other functions does it overlap with, and how should the GC relate to them? (d) what are the pros and cons of having the GC sit on the board? What is his or her relationship with the board and other executives? (e) what legal or compliance matters do Japanese companies need to pay more attention to? (f) what is it like to participate in board decision-making itself, not only as GC but also as a foreigner, on a Japanese board? What can be done by Japanese companies to benefit more from diversity? – to name just a few.
After the interview, there will be a panel discussion including other experienced legal advisors and independent directors at global companies. We will be joined by Chika Hirata, currently Regional Head of Ethics and Compliance at Takeda, and the former CLO and Corporate Secretary at MetLife Japan; and by Yumiko Ito of Ito Law Office, who also serves as an independent director for Kobe Steel, Ltd. and as an independent corporate auditor for Santen Pharmaceutical, Co., Ltd.
This event will be held in English.
In this webinar hosted by the Good Governance Academy of South Africa, the institutional characteristics of corporate governance in Japan were compared with other countries and the progress of the Japanese corporate governance reform since 2013 was highlighted. In particular, the changes that have occurred in Japanese companies and capital markets, as a result of recent reforms in corporate governance, were discussed, including by Genta Ando of METI, together with how these changes have been perceived in Japanese society. Finally, the actual state of corporate governance in Japan was reviewed considering Japanese company corporate disclosures, with commentary by Professor Mervyn King.
by David Snoddy, CEO of Nezu Asia
The nature of Japan’s relationship with equity market capitalism changed significantly from the first decade to the second of the 21st century. The first decade, particularly after the resignation of PM Koizumi in 2006, was often characterized by open conflict, with the most obvious examples being the arrest and conviction of shareholder activists Horie and Murakami, and the legal and regulatory attacks on both the consumer finance and leveraged real estate businesses (among others). However, approximately around 2011, the attitude of both government and the public morphed into something more resembling symbiosis than conflict. In the third decade of this century the symbiosis mode seems still to be ascendant.
Many of the top-down aspects of this shift have been well documented and discussed both in Japan and in the West – from the 2015 Corporate Code, to the 2014 Fiduciary Code and the emerging catalysts created by the rule set for Tokyo’s new “Prime” market. From the perspective of governance per se, there have been some concrete steps “backwards” (with the Toshiba drama a prime example). However, the cumulative effect of the change in the regulatory suasion regime in Japan is such that it is difficult to find equity market participants who believe that the governance environment in 2021, on average, is not noticeably more shareholder-friendly than it was 10 years ago.
Over the same period there has also been a dramatic shift in trends in Japanese equity price formation. This is not well documented or understood. But it is in fact the micro expression of the same impulses which are driving the “macro” changes in the regulatory regime. Since 2011, there has been a marked change in how the market “votes with its feet” – rewarding companies who conform to the new desired profile, and punishing those who don’t. Specifically, capital efficiency and, to a slightly lesser extent, revenue growth, have captured outsized returns.
The top-down changes in the regulatory regime are on one side of the coin. The bottom-up changes in price formation are the other side of the same coin.
The socio-economic function of equity capitalism in Japan is somewhat uncomfortably positioned between two massive sources of pressure. On the one hand, the aging of Japan’s society is slowly turning active employees into pensioners who, either directly or indirectly, depend on financial income to maintain their living standards. This economic pressure provides the core motivation for the changes in Japan’s approach to equity capitalism – both from the top and the bottom. One the other hand, there is a near-consensus social desire to protect and maintain the lifetime employment system, albeit only for a subset of employees. Predictably, these two pressures are often in conflict, which accounts for some of the peculiarities of “equity capitalism with Japanese characteristics.”
The social commitment to maintain the lifetime employment system predates all of the data to be presented here. The demographic challenges posed by the aging of society have been building for a generation or so, but it was only after 2011 that they resulted in a shift towards a noticeably more cooperative approach to equity markets.