METRICAL:CG Stock Performance (Japan): October 2023

In October, the stock market was in step with the U.S. stock market, which rose and fell in response to changes in U.S. long-term interest rates, and after a decline at the beginning of the month and a rebound in the middle of the month, the stock market was in a selling trend toward the end of the month.
The CG Top 20 index outperformed the TOPIX and JPX400 indexes for the second consecutive month in October.

METRICAL: Disclosure of Management Strategies with Cost of Capital and Stock Price in Mind Is Still Limited

TSE has released the material “Status of Companies’ Responses and Follow-up on “Responses to Achieve Management Conscious of Cost of Capital and Stock Prices” at the 11th Follow-up Meeting on Revision of Market Classification held on August 29, 2023. I would like to provide a summary of this document below and consider the issues discussed.

Status of display regarding “Measures to realize management conscious of cost of capital and stock price”
 Based on the corporate governance reports* of listed companies in light of the recent request for “measures to realize management with awareness of cost of capital and stock price” (compiled as of mid-July, when the CG reports of companies whose fiscal year ended in March were available).
※ The current request does not specify the documents to be disclosed, but requires that a statement be made in the CG report to the effect that disclosure has been made and the method of access to such disclosure.

Outside Director Lessons #9: Appointing the CEO

If you are ever in the situation I described in “Outside Director Lessons #8” (see link below), here is what you can do. To begin with, in that situation, you might begin before the AGM, by quietly asking the person that investors supposedly want as the new CEO, if he or she really wants the position and why. Being a CEO is always a lot of work, especially if you have other activities. The person may respond without a lot of clarity, or even signal a sort of reluctance.  That is vital information.

Outside Director Lessons #8: The Role of the Board

Before Livedoor’s December 2006 AGM, one of the other newly nominated “independent directors”,  asked me whether (if elected) I would vote to remove the current CEO. I replied that I could not answer that question, because I was not on the board yet and had no direct knowledge about what was going on inside the company, including the performance of the CEO.

In response, this director candidate responded, “But if the shareholders want that, how can we not fire him?”

Outside Director Lessons #4: What is Worse Than the Company Going Under?

Here is an example of the sort of thing that can happen at mid-size companies in Japan. Let’s say that at the time when you join the company as an outside director, the son of the founder is the CEO.  The son is an engineer by training, but when his father became too old to lead the company, the son took his place. The son is the nicest, most gentle man in the world, but he does not have enough management experience or the character to serve as a decisive leader at a time of disruptive technological change.  It is clear to you that that he will have to step down, and the board will have to find someone from the outside who has more managerial experience and decisiveness.

At that point, your self-appointed job becomes “finding a soft, smooth way to persuade the CEO to step down”. 

Outside Director Lessons #3: How Suddenly Companies Can Collapse!

As its sales increased, Alps had financed its growing working capital needs by borrowing from banks.  But no bank wanted to be a “main bank” for a small unlisted company any more. So every year or so we added another bank lending us 200 million yen or more, until we had something like six or seven different banks. All of these loans were short-term, and had to be “rolled over” each year.

As long as all the banks rolled over their loans each year, and we were able to find a new bank when we needed it, to the board, everything seemed fine.

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

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.

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

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.

Solving Gender Gap in Higher Education Is Key, as Political Leadership Can’t Be Count On

The World Economic Forum (WEF) released its Gender Gap Report on June 21. I would like to discuss Japan’s ranking in the Gender Gap Index.

Japan’s ranking in the Gender Gap Index is as follows.
Among the G7 countries, Germany was the top-ranked country in 6th place, up four places from 10th the previous year. It was followed by the United Kingdom (15th), Canada (30th), France (40th), the United States (43rd), and Italy (79th). Japan was the only country that did not even make the top 100, falling nine places from 116th the previous year to its lowest ranking ever. The percentage of women in parliamentary and ministerial positions is low, and the country is in the lowest group in the political field, ranking 138th. Japan also ranked 123rd in the economic field, reflecting the labor participation rate and the gender gap in wages. In the education sector, the country also fell in rank to 47th place due to a lower enrollment rate of women in higher education.

The Gender Equality Bureau of the Cabinet Office, which promotes “women’s activities” rather than gender equality, usually posts a statement on the Gender Gap Index on its website, but although Japan’s ranking in the Gender Gap Index of 125th/146th countries (announced on June 21, 2023) is posted, the rankings for each field have not yet updated as of June 24.

Discussion Point 1: “Japan’s ranking in the Gender Gap Index is 125th/146th, a drop of nine places from 116th place last year and a record low.”
Since the Gender Gap Index rankings are relative, it is only natural that the country’s ranking would be lower than the speed at which the gender gap in other countries is improving. The main reason for this is that the ranking in the areas of “Politics” and “Economy” has not improved at all from its very low ranking position, compared to “Education” (99.7%) and “Access to Health Care” (97.3%), when looked at by sector.

What Should the Legal Department Know about ESG?

A conversation between several lawyers at Tanabe & Partners (T&P) on the topic —


In this discussion, I would like to look at ESG international voluntary disclosure standards that legal departments should be aware of. Since hundreds of standards are gradually converging, why don’t we focus on two standards, GRI and ISSB. First, should legal departments keep up with ESG disclosure standards? Some people seem to think that the corporate department, committee or task force charged with sustainability should know about such standards, and that the legal department should leave things up to them. What do you think about this?


ESG has become an integral part of corporate strategy and risk management. The legal department is expected to fulfill its role in both promoting strategy and improving risk management, so it cannot afford to be ignorant of the basics of ESG disclosure standards. International disclosure standards are gradually being woven into regulatory disclosure. For starters, Japanese companies are required to include a statement of “sustainability-related views and initiatives” in their Yuho.

When you are asked to review a contract from a legal perspective, what do you rely on? You can only review the contract, if you know the Civil Code, the Companies Act, etc. Legal is asked to review because Legal is able to foresee what will happen if the contract is breached, what will happen if the law is violated, etc. It is difficult to conduct an effective review of ESG disclosure without knowing the system and the concept of ESG disclosure standards.