The Causes of Japan’s Lost Three Decades”

The 1990s were called the Lost Decade in Japan, and then as the economy seemed to stagnate in the 2000s, it became the Lost Two Decades.  Now the Nikkei Business in a recent special series seems to be saying it has been a lost three decades.  Turnover and profitability were growing through to around 1990 […]

Glass Lewis:” Proxy Guidelines for 2020″

“….As announced in our policy guidelines last year, beginning in 2019, for companies listed on the first and second sections of the TSE, we will begin making recommendations against members of a board that does not have any incumbent or proposed female members. In such instances, we will generally recommend voting against the chair of the company (or the most senior executive in the absence of a company chair) under the two-tier board or one-tier with one committee structures, or against the nominating committee chair under a one-tier with three committees structure. In the case of a two-tier board structure, we will examine the board of directors and board of statutory auditors as a whole, and in the cases of one-tier with three- committee structures, we will consider whether the company has any female executive officers as well as female directors.

Metrical:”How Fast has Japan’s Corporate Governance Improved? “

Some research organizations reported that Japanese companies have enhanced the corporate governance and others say the improvement wasn’t higher than expectations. Then, how fast has the corporate governance in Japan made progress for a few years? There would be different perspectives on which criteria each person focus. We would like to show one of the easiest ways that we can see the progress. It is the % of Independent Outside Directors (INEDs) of the board of directors (BOD) that shows very well how fast corporate governance in Japan has improved.
Please see the following 2 charts. The first pie chart shows the number of companies of >50% INEDs and =<50% INEDs in the BOD, respectively as of November 2019. The total number of companies was the companies METRICAL INC. covers as the core research universe (most of companies are listed TSE-1st Section and/or JPY10 billion market cap). A number of companies are included in the =50% INEDs in the pie chart will decrease significantly.

Metrical:”Ex-CEO advisors”

This month METRICAL shows how the disclosure about ex-CEO advisors has progressed from a year ago. As shown the table below, in October 2018, 829 companies on METRICAL’s research universe disclosed the number of ex-CEOs (ex- Representative Directors) who retained positions as “advisor” in the company after stepping down as CEO. Of these companies that voluntarily disclosed, 474 companies had ex-CEO advisors. A year later in October 2019, a total of 894 companies disclosed the number of ex-CEOs who retained such advisory positions seat in the company after stepping down from the top management position. Of these 894 companies, 503 companies had ex-CEO advisors in October 2019.

“Japan’s Unfinished Corporate Governance Reforms”, by Nicholas Benes

My article on Japan’s unfinished reforms is online now. Lest the Abe administration and regulators “declare victory” when they are only half done, I describe seven specific measures that Japan needs to adopt in order to bring its market up to a global standard for a developed nation:

  1. Detailed rules for an independent committee
  2. A clear requirement for a majority of independent directors on the board
  3. Codifying the role and responsibilities of executive officers
  4. Consolidation of overlapping disclosure reports
  5. Protection of minority shareholder rights
  6. Enhancing transparency to reduce entrenchment and enhance inclusiveness
  7. Strengthening stewardship throughout the investment chain

I stress the reality that in all of these, strong political leadership from the Prime Minister and other senior parliamentarians will be needed. “Thus, is it essential that the Tokyo Stock Exchange (JPX/TSE) and the various regulatory agencies keep up reform momentum. However, one senses a desire from these groups to ‘declare victory’, and they have a tendency to not fully coordinate with each other. If Prime Minister Abe’s cabinet did more to make the key players coordinate their efforts in key areas, meaningful governance change (and protection of investors) would accelerate….