Tag: CG Guidelines

What Needs to be Added to the “Action Program for Accelerating Corporate Governance Reform: From Form to Substance”

2024-08-23 posted by

Nicholas Benes
Representative Director, The Board Director Training Institute of Japan (BDTI)
(The following is my personal opinion and not that of any organization. This is a translation of the original article.)

As sent to prospective candidates to be the next Prime Minister, in no particular order:
Chief Cabinet Secretary Yoshimasa Hayashi, Minister for Foreign Affairs Yoko Kamikawa, Minister of Economy, Trade and Industry Ken Saito, Minister for Digital Transformation Taro Kono, Minister in Charge of Economic Security Sanae Takaichi, Secretary-General of the Liberal Democratic Party Toshimitsu Motegi, House of Representatives Member Shigeru Ishiba, House of Representatives Member Shinjiro Koizumi, House of Representatives Member Takayuki Kobayashi, House of Representatives Member Seiko Noda, House of Representatives Member Katsunobu Kato.

CC: Prime Minister Fumio Kishida, Deputy Chairman of the Liberal Democratic Party’s Political Research Committee Masahiko Shibayama, Parliamentary Vice-Minister of Health, Labor and Welfare of the Liberal Democratic Party Akihisa Shiozaki, Deputy Secretary-General of the Liberal Democratic Party Seiji Kihara, House of Representatives Member Kenji Nakanishi.

Japan’s Corporate Governance Code (CGC) and the investor Stewardship Code need to function as “two wheels” of a cart. I had advocated this since 2013, and when I had the opportunity to formally propose the establishment of the CGC to the Liberal Democratic Party in 2014[1], I insisted that the most important thing was to “promote the disclosure of information that enables one to verify governance structure and substance” at firms.

“Governance and oversight are more likely to function effectively on a board that has a majority of truly independent and qualified independent directors.” As of 2014, this dynamic had been recognized in many countries around the world. At the time, I thought that if companies disclosed their actual governance practices and stewardship by investors started functioning well, Japan, as a developed country, would naturally adopt a similar stance within the next five years or so.

Ten years later, however, there is still no serious discussion of these two issues in Japan. Now that global investors are paying more attention to the Japanese stock market, I believe it is time for us to confront these core issues and take the following steps to speed up Japan’s governance transformation.

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BDTI/METRICAL CG Research Update: “Linkage between CG Practice and Value Creation”

2018-05-05 posted by 1 Comment

BDTI and METRICAL collaborate on researching the linkage between CG practices sand value creation. We have recently released our updated analysis as of April 2018 for the roughly 1,800 publicly traded companies with market capitalization exceeding about JPY10 billion.

In this analysis, by examining board practices (CG guidelines, practices, and composition of the Board of Directors) and specific actions (real actions by a company) separately, we try to identify statistically significant correlations with financial performance measures (ROE, ROA, Tobin ‘s q) for each of these respectively – i.e, for, board practices and action respectively.

We have observed a certain degree of improvement in board practices since the introduction of the Corporate Governance Code.  However, assuming that one of the key goals of the corporation is value creation, in order to improve the effectiveness of engagement and stewardship it is very important to regularly analyze the way in which such improvement (and specifically, which improvements) appears to lead to value creation.

We can summarize the results of our recent analysis as follows:

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2017 OECD Corporate Governance Factbook

2017-04-05 posted by
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“How Japanese Companies are Navigating the Corporate Governance Code” (Speech to CII)

2016-10-07 posted by

Here is the short speech that I gave to the Fall 2016 Conference of the Council of Institutional Investors (CII),  on September 30, 2016.  On this video, my speech starts at the 36:00 minute point.   Below, I have reproduced the CII’s summary of my comments, and further below, the full text of my speech.

” Nick Benes, representative director for the Board Director Training Institute of Japan, said a sea change is underway in Japan in terms of companies beginning to comply with the Corporate Governance code, but there is still room for improvement. He reported that almost 80 percent of Japanese companies now have two or more independent directors and 40 percent of large companies have their own corporate governance guidelines, but beyond that, the reforms that companies say they have in place are lacking in substance. He estimated that 90 percent of firms say they comply, but have little evidence this is the case and few have actually changed their practices. Despite these setbacks, Benes said he remains optimistic that Japanese companies will move in the right direction because there is now broad awareness that “governance is good”. Additionally, disclosure has vastly improved and the number of votes opposing the re-election of directors is climbing. A video of this session is available here.

cii-chicago

Text of Speech (and Slides)

“In 2013, I was lucky enough to propose to key congressmen in Japan, that Japan should have a Corporate Governance Code.  I then advised them, and then the Financial Services Agency, about the content of the Code.

So I am very pleased to have this opportunity to summarize the progress that Japanese companies have made so far in implementing the principles of the Code, based on my activities as consultant, independent director, “directorship” trainer, and policy advocate.

My main message to Committee members is this:

1)    A sea change is underway in companies, the media, the government, and the public. Because Japan is a “shame-based” society, the vastly enhanced disclosure required by the Code has created a strong virtuous circle.

2)    These changes represent a very big opportunity for foreign investors, but only IF they study the Code and the disclosures in detail, and then leverage the Code’s principles so as to make specific requests for better governance practices to Japanese companies they invest in, while also brandishing the possibility of consequences – such as not re-electing senior executives, – if progress is not made.

Here are some highlights “from the trenches” about what is occurring in Japan:

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”Thoughts on the Business Roundtable’s Principles of Corporate Governance”

2016-09-12 posted by

Following the release of the ”Commonsence Principles of Corporate Governance ”  by a diverse, twelve-member coalition of executives of major corporations, asset managers and one shareholder activist in America in July 2016, the influential Business Roundtable (“BRT”) recently released a set of corporate governance principles which are to provide guidance on governance disclosure.

Whereas the Commonsence Principles of Corporate Governance are mainly 8 recommendations on roles and responsibilities of the board, companies and shareholders, the BRT Principles extensively cover the key governance issues such as board responsibilities, roles of key corporate actors, committee responsibilities and other, elemental, governance concerns historically addressed by the organization.

In his article, Michael W. Peregrine, of McDermott Will & Emery LLP shares his thoughts on the BRT Principles that articulate these governance issues on  long term value sustainability, shareholder engagement, board diversity, committee practices and succession matters.

Read full article here.

Source: Havard Law School Forum on Corporate Governance and Financial Regulation

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Principles of Corporate Governance 2016 by the Business Roundtable

2016-09-10 posted by

”Foreword and Introduction

Business Roundtable has been recognized for decades as an authoritative voice on matters affecting American business corporations and meaningful and effective corporate governance practices. Since Business Roundtable last updated Principles of Corporate Governance in 2012, U.S. public companies have continued to adapt and refine their governance practices within the framework of evolving laws and stock exchange rules. Business Roundtable CEOs continue to believe that the United States has the best corporate governance, financial reporting and securities markets systems in the world. These systems work because they give public companies not only a framework of laws and regulations that establish minimum requirements but also the flexibility to implement customized practices that suit the companies’ needs and to modify those practices in light of changing conditions and standards.

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FT: “Sharp Warns on Ability to Stay Afloat after $1.9bn Loss”

2015-05-14 posted by

BDTI’s Representative Director Nicholas Benes is quoted in his article about Sharp in the Financial Times this morning. Excerpts:　　

Sharp, a century old stalwart of corporate Japan, has unveiled an annual loss of $1.9bn and warned of “material uncertainty” about its ability to stay in business, less than three years after facing a similar crisis of survival.

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The Economist: “The Anti-Bribery Business”

2015-05-13 posted by

Even for a company with Wal-mart’s heft, $800 million is a sizable sum. That is what the giant retailer will have spent by the end of this fiscal year on its internal probe into alleged bribing of Mexican officials, into whether subsidiaries elsewhere may have been greasing palms and on related compliance improvements.

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