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CG Top 20 stocks continued solid performance in August
August stock prices have continued low trading volume. Topix and JPX400 indices tumbled in the middle of the month, but recovered toward the month end. Meanwhile, CG Top 20 prices also recovered their losses toward the end of the month. The gap between CG quality stocks and the market indices is widening. The stock price charts for in the indices and the composite of CG top 20 companies are shown in the following link.
1. Regarding the Overall Revision Process
2. Regarding Principle 2-6 (Activating the Function of Corporate Pension Funds as Asset Owners)
3. Regarding Principle 1-4 (“Policy Shareholdings”)
4. Regarding Principles 4-1③,4-3② and 4-3③ (Appointment and Termination of the CEO)
5. Regarding Principle 4-10① (The Use of Optional Structures)
6. Regarding Principle 4-14 (Training of Directors and Kansayaku)
7. Regarding Revision of the Machine-Readable Format of Corporate Governance Reports
(Note: This is a translation of a public comment which was originally written in Japanese and submitted in that form to the JPX/TSE. The original version of the public comment is available here.)
1. Regarding the Overall Revision Process
I would like to express my thanks and appreciation for the hard work of the members of the Followup Committee with respect to this review of the Corporate Governance Code (the “CG Code”) . However,I would note that four years have elapsed since the initial drafting of the Code. As you know, in Germany there is a commission which monitors the effectiveness of the governance code on an ongoing basis, and proposes changes on a yearly basis if and as necessary.
The Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code (Chairman: Kazuhito Ikeo, Professor of Economics and Finance, Keio University) has published its proposals for “Revision of the Corporate Governance Code” and “Guidelines for Investor and Company Engagement”. Both are being put out for public comment until April 29, 2018. Full information from the FSA is available here. The documents themselves are available the links below.
（Appendix1）Japan’s Corporate Governance Code (Draft Revision)
（Appendix2）Guidelines for Investor and Company Engagement (Draft)
” With the recent developments in ESG (Environment, Social and Governance) in our country, the Ministry of the Environment established a “Working Group on Incorporating Issues Regarding Sustainability into Investment” (ESG Working Group) in October 2015. Following discussion and debate over two fiscal years, the Ministry is pleased to announce that it has produced the […]
The Economist has published two articles on ESG, one focusing on its expansion in Japan led by the GPIF and the other focusing on the impact of passive funds on the effectiveness of ESG investment overall. I was [accurately] quoted in the former – ” Nick Benes, who heads the Board Director Training Institute of Japan, an educational body, says he is “all for” the enthusiasm for ESG in Japan. But he frets that Japanese companies are focusing on environmental and social aspects at the expense of governance. “That is the real driver of sustainability,” says Mr Benes. “But here it’s a big, bold E and S, and a small, plain G.”
CG Top 20 stocks raised its outperformance, hitting all-time high Top 20 CG Score Index continued outperformance for September 2017 in favor of stock market rally for September. CG top 20 stocks hit its all time high of June 2015 when Corporate Governance Code was launched. This would be due to a sign that an increasing number of long-term investors are coming […]
Steady progress is indeed being made as a result of the efforts being made to improve corporate governance in Japan now that remarkable changes are observed. “Japan is the land of the rising sun, but as far as corporate governance is concerned, it has been more a land of false dawns over the past 15 years or so. However, some significant […]
The GPIF should be highly commended for including reference to “the corporate governance codes of each country” to its recent statements regarding its stewardship policy and its proxy voting policy. This is a major step forward, considering the politics that it faces and the long-standing and unfounded claim by leaders in the industrial community who claim that if the GPIF had its own “principles and guidance for governance and proxy voting”, that would be “intervening in managerial decision making. Even though the reference in the recently-released principles bends over backwards to encourage “giving a full hearing to explanations of non-compliance”, if you know the full background, this is significant progress. (For the first time, the GPIF has uttered the words “corporate governance code” in writing!)
Titlis has updated corporate its governance ratings for 500 major public companies in Japan as of September 2016. The CG scores improved 3/100 pts from a year ago, steadily but at a slower pace than expectations at the inception of Corporate Governance Code. According to the attribution analysis of the changes in CG scores for a year, the category (factor) of the Board of Directors was the largest contributor and the categories of Incentive of Remuneration, Takeover Defense, and Share Cancellation also inched up scores.
Cross-shareholdings should be considered the effect of share price plunges. The resolution of cross-share holding is extremely slow. We should keep eyes on enhancement of CG.
http://www.titlisgroup.com/mwbhpwp/wp-content/uploads/CGR-attribution20161008.pdf
By Peter Knight, President, Generation Investment Management, Fiona Reynolds, Managing Director, PRI, Nick Robins, Co-Director, UNEP Inquiry into a Sustainable Financial System and Eric Usher, Head, UNEP Finance Initiative
Executive Summary:
In China, Hong Kong, India, Malaysia, Singapore and South Korea there are compelling national interest reasons for policy makers to promote the incorporation of environmental, social and governance factors into investment practice. Issues include addressing air quality, improving citizens’ long-term health, reducing inequality, providing for an ageing population and attracting the international capital necessary to meet economic growth targets. Investing prudently requires ESG factors to be considered in investment decision-making and to be part of the dialogue between investors and companies. This is consistent with the legal framework in all the markets studied in this report.
However, despite growing awareness of responsible investment, many investors have yet to fully integrate ESG factors into their investment decision-making processes. Public policy and regulation are a key influence. Currently, these markets have few formal requirements to integrate ESG factors, but investor obligations and duties are dynamic concepts that continuously evolve as society changes.
By working together, policy makers and investors can shape investment frameworks to clarify the obligations and duties investors owe to beneficiaries – obligations to embed ESG factors into investment decision-making, ownership practices, and ultimately, the way in which companies are managed.