The Board Director Training Institute of Japan (BDTI)

Next Director Boot Camp is January 31st!

11/18 “Director Boot Camp” Held by Zoom! Next Courses: 2022.2.7!

2021-11-25 posted by Admin

On July 13th, still in the midst of the pandemic, BDTI held its English Director Boot Camp via teleconference. The day-long intensive course was attended by 6 highly-experienced and highly interactive participants. The participants heard lectures about corporate governance by Nicholas Benes along with a guest lecture by Andrew Silberman of AMT, and exchanged experiences and opinions. Even during a pandemic, training continued smoothly, with all participants chiming in with insightful comments and questions.

We are planning to hold the next course on February 7(Mon)2022. Sign up early! Please see a description of our director training course here or click the button below for further information.

Eiichi Shibusawa: The Spirit of Japanese Ethical Capitalism & Sustainability

2021-11-12 posted by Admin

Ken Shibusawa and Christina Ahmadjian, and Joshua W Walker Thank you –that was an excellent, concise explanation/introduction about ” Eiichi Shibusawa: The Spirit of Japanese Ethical Capitalism & Sustainability”. Well done! To others: worth watching. I am always impressed by how deeply persons like Shibusawa thought about issues related to capitalism and its related social issues that need to be addressed, even at very early stages in its birth. When I have taught business ethics, I really appreciate reading the thoughts of Shibusawa, Adam Smith, Andrew Carnegie, and others. (webinar by the @JapanSociety_SF @japansociety )

Posted by Nicholas Benes

METRICAL: CG Stock Performance – October 2021

2021-11-05 posted by Aki Matsumoto

Stock market declines in October. CG Top 20 stocks significantly outperformed the index.

In a reversal of the previous month’s sharp rise, the stock market plunged in the first half of October, followed by a market stalemate ahead of financial reports starting at the end of the month. Topix and JPX400 indices fell -1.34% and -1.35%, respectively, during the month of October, while the CGTop20, the top CG rating score, outperformed both indices by a smaller margin, -0.41%.

METRICAL: Considerations for Nominating Committees

2021-11-01 posted by Aki Matsumoto

Nominating committees are the most difficult issue in corporate governance practices. Since the election (nomination) of directors is a matter that involves personnel rights, and personnel is also a matter that has a great deal to do with compensation, the CEO is still deeply involved in this decision in many companies, especially in Japan where the board of directors is composed of many inside directors. It is not difficult to imagine that there would be resistance to delegating this decision-making authority to independent outside directors. To conclude, even if a nominating committee has been established, it is impossible to know whether the committee is functioning properly without a close examination of the substance of the committee. In order to check whether the nominating committee is functioning properly, the first point to be considered is whether the majority of the members of the committee are independent outside directors, and whether the committee is chaired by an independent outside director. However, a prerequisite for this is that the board of directors must be prepared to accept decisions on director nominations made through a transparent and objective process. This can be thought of as the board of directors itself being operated in a transparent and objective manner. As a measure of this, I would like to examine whether independent outside directors make up the majority of the board of directors. If the board of directors is dominated by inside directors, it is unclear whether the process of nominating directors is carried out in a transparent and objective manner, and it is also unclear whether the board of directors approves the proposed candidates for directors submitted by the nominating committee.

First of all, as shown in the table below, the current status of the nominating committees of all listed companies in Japan is as follows: of the 3,733 companies that submitted corporate governance reports out of the 3,784 companies listed on the Tokyo Stock Exchange as of October 1, 2021, 82 companies (2% of the total) are companies with nominating committees under the law. (2% of the total). There were 1,249 companies with audit committees and 2,401 companies with board of corporate auditors, of which 609 companies (49%) and 1,046 companies (44%) had voluntary nominating committees in their respective organizational forms.

METRICAL:Information Disclosure in English

2021-10-04 posted by Aki Matsumoto

I have previously written and reported on information disclosure in English. This time, I would like to think about information disclosure in English again. The BDTI and Metrical have repeatedly stressed the importance of information disclosure in English, and recently the TSE released the “Results of a Survey of Foreign Investors on English-language Disclosure”, so this issue is gradually gaining attention. The Tokyo Stock Exchange’s “Availability of English Disclosure Information by Listed Companies” provides information on the disclosure of information in English by listed companies. According to this information, there are three types of information disclosure in English: “Timely Disclosure Documents,” “Notices of General Shareholders Meetings,” “Corporate Governance Reports,” “Annual Securities Reports,” “IR Presentations,” and “IR Website English Links” based on disclosure information provided by listed companies.

According to TSE data as of June 30, 2021, of the 3,782 companies listed on the Tokyo Stock Exchange, 3,730 companies for which data could be compiled disclosed information in English for each item as follows. For IR Presentations and IR Website English Links, about half of the listed companies disclose information in English. The second most commonly disclosed item in English is earnings reports such as financial statements, with 38% of companies disclosing in English. The two reports with the least disclosure in English are the annual securities report (Yuho) and corporate governance report, with 6% and 11% of companies disclosing in English, respectively.

ICGN Excellence in Corporate Governance Programme 2021

2021-09-13 posted by Admin

Seems like a good program. If you sign up, kindly please also tell us at info@bdti.or.jp so we can get credit for the introduction.

ICGN Excellence in Corporate Governance Programme 2021

This 4-part course builds an awareness of how institutional investors with globally diversified portfolios analyse corporate governance practices and a company’s approach to generating long-term value. The curriculum focuses on recent changes to the Japan Corporate Governance Code and standards expected of JPX listed companies, particularly the new Prime Market segment. The ICGN Course provides:

Global Investor Lens with ICGN Member opinion responsible for AuM in excess of over $59 trillion, based in over 40 countries

Best Practices based on ICGN’s Global Governance Principles used by ICGN Members in voting polices and company engagement

Local Relevance applicable to national standards/regulations and clarity around any differences between local and global standards

Practical Experience featuring live case studies from international investors and pre-recorded keynote speeches

The ICGN Faculty is a prestigious group of professionals with practical experience from the corporate and investment field. Each 90-minute module will include insights and case studies presented by an international guest (with simultaneous interpretation) and teaching from the lead faculty member in Japanese language. Participants can also view a pre-recorded 15-minute keynote speech from an influential governance practitioner.

METRICAL: Diversity Has To Be Strong

2021-09-01 posted by Aki Matsumoto

This month, we will focus on diversity again. This is because I believe that diversity raises the bottom line of a company. Diversity is deeply related to S and G of ESG, and it has a great impact on the transformation of a company’s culture. On the other hand, it seems that many Japanese companies are more keen on “E” than “S” and “G” in their ESG initiatives, because “E” is an area that is relatively easy to tackle for Japanese companies that have a successful experience of setting technical numerical targets such as CO2 emission targets and improving the technical level through bottom-up efforts led by engineers to eventually achieve high targets. Even in the S and G areas, it should be possible to set clear goals and set timeframes for improvement without setting numerical targets. In several articles on diversity, I have mentioned the importance of respect for human rights, or in other words, understanding diversity, in order to build an environment where everyone can live comfortably, whether in a company or a society where various people are involved. On Thursday, August 19, I attended the analyst meeting of Monogatari Corporation (3097), which is engaged in advanced diversity initiatives as mentioned in my previous article, to discuss its financial results for the fiscal year ending June 30, 2021, and I would like to update you on the company’s diversity initiatives.

Monogatari Corporation is one of the listed companies that is proactively working on diversity. As of June 2021, the company had 126 employees from 13 countries (10% of the total workforce), an increase from 105 employees from 11 countries (9.5% of the total workforce) as of December 2020. In the past six months, the number of store managers with international (foreign) nationality has increased significantly from 4 to 18. In addition, the company is also working to support the activities of LGBTQ employees, with training for all employees starting with basic knowledge and how to respond in the workplace and sharing the idea of understanding and supporting all sexualities. Also, the company has introduced a “Life Partnership System” that allows same-sex partners to receive the same treatment as legal marriages within the company. In Japan, where same-sex marriage is not yet legally recognized, this system allows LGBTQ employees to receive the same treatment as legally married couples in the company.

METRICAL:CG Stock Performance (Japan): July 2021

2021-08-04 posted by Aki Matsumoto

The CG Top 20 continued to outperform both the Topix and JPX400 indices in July. The change in the Bank of Japan’s ETF purchase program may have had an impact.

Topix and JPX400 indexes were down -2.12% and -2.52% respectively in July. The top CG rating score, CGTop20, was flat, but outperformed both indices for the 4th consecutive month.

Topix and JPX400 indexes were down -2.12% and -2.52% respectively in July. The top CG rating score, CGTop20, was flat, but outperformed both indices for the 4th consecutive month.
The table below shows the period from April 2020, when the stock market is recovering from last year’s plunge due to the rapid spread of COVID infection, to March 2021, when the Bank of Japan announced a change in its ETF purchase program, and the period (b) after April 2021. CG Top20 underperformed against both indices in period (a), while it outperformed in period (b). It is unclear whether this is due to the effect of asset inflation caused by ultra monetary easing triggered by the COVID pandemic or the change in the Bank of Japan’s ETF purchase program, but I suspect it is because the stock market has started to reflect certain fundamentals more clearly. The outperformance of the CG Top 20 stocks suggests that the market has begun to value higher quality stocks.

METRICAL: Why Are Scandals Repeated In the Same Company?

2021-08-04 posted by Aki Matsumoto

The topic of this year’s annual shareholders’ meeting was Toshiba again. As many of you may have heard, an external report revealed that “Toshiba and the Ministry of Economy, Trade and Industry worked together to exert undue pressure on some of its shareholders over a personnel proposal by its largest shareholder, Effissimo Capital Management, which was rejected at the annual shareholders’ meeting last June. This led to the replacement of the proposal for the election of directors (proposed by the company) at the annual shareholders’ meeting, and the reappointment of the director who chairs the board of directors was rejected at the shareholders’ meeting. In the wake of the accounting scandal that broke in 2015, it was thought that Toshiba had revamped its governance structure, with 10 of its 11 directors now independent outside directors and the transition to a company with a nominating committee, but the scandal has struck again. In January this year, Toshiba IT Services, a subsidiary of Toshiba Corporation, was found to have window-dressed its accounts with fictitious transactions. In addition to Toshiba, Nissan Motor, Mitsubishi Motors, and other companies have been repeatedly involved in scandals in the past, hiding recalls and cheating on inspection data. Why are the scandals repeated?

Companies that have been involved in scandals often set up independent or internal investigation committees to investigate the scandal, and then report the findings to the relevant authorities so that they can be used to improve the situation in the future. Why are scandals repeated without being applied to future improvements? There is not much research on this subject (perhaps because there are few companies outside of Japan that cause repeated scandals?) I found the concept of “Groupthink” by Janis, Irving, Groupthink: Psychological Studies of Policy Decisions and Fiascoes, 2nd edition (Boston: Houghton Mifflin Company, 1982) helpful. Groupthink is the tendency to act in a way that maintains group cohesion and comfort rather than making calm and objective judgments, resulting in poor quality solutions and objectively strange decisions. Groupthink is more likely to occur under the following circumstances: (1) the group is highly cohesive and isolated from the outside world, (2) there is no checking of opinions or provision of information in the process of considering a case, (3) there is a strong leader or influential person, and (4) there is excessive control, lack of time, and few clues. In Japanese society, where group cohesion is often prioritized over individual opinions and where peer pressure is strong, people tend to fall into the “Groupthink” described above, and as a result, I assume that it is not uncommon for objectively strange judgments and decisions to be made.

However, as mentioned above, Toshiba has reformed its governance system and now all but one member o

“Carbonwashing: A New Type of Carbon Data-related ESG Greenwashing” (Young and Schumacher)

2021-07-30 posted by Admin

“ Despite the increased attention and capital incentives around corporate sustainability, the development of sustainability reporting standards and monitoring systems has been progressing at a slow pace. As a result, companies have misaligned incentives to deliberately or selectively communicate information not matched with actual environmental impacts or make largely unsubstantiated promises around future ambitions. These incidents are broadly called “greenwashing,” but there is no clear consensus on its definition and taxonomy. We pay particular attention to the threat of greenwashing concerning carbon emission reductions by coining a new term, “carbonwashing.” Since carbon mitigation is the universal goal, the corporate carbon performance data supply chain is relatively more advanced than that of the entire sustainability data landscape. Nonetheless, the threat of carbonwashing persists, even far more severe than general greenwashing due to the financial values attached to corporate carbon performance. This paper contextualizes sustainable finance-related carbonwashing via an outline of the communication as well as the measurement, reporting, and verification (MRV) of carbon emission mitigation performance. Moreover, it proposes several actionable policy recommendations on how industry stakeholders and government regulators can reduce carbonwashing risks.”

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