Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>The issue of a lack of female management positions—and consequently, a shortage of female internal board members—is a deep-rooted problem that cannot be solved by individual companies alone.</li>
<li>The question is whether companies that have met their targets for the proportion of female board members are creating value and demonstrating superior returns on capital and stock price performance.</li>
<li>Regarding the proportion of female board members, the correlation with value creation indicators has weakened somewhat compared to when only a small number of companies had appointed female board members.</li>
</ul>


The issue of a lack of female management positions—and consequently, a shortage of female internal board members—is a deep-rooted problem that cannot be solved by individual companies alone.
The question is whether companies that have met their targets for the proportion of female board members are creating value and demonstrating superior returns on capital and stock price performance.
Regarding the proportion of female board members, the correlation with value creation indicators has weakened somewhat compared to when only a small number of companies had appointed female board members.


While % of Female Board Members Has Risen, Now Is Time to Ask Whether Companies Are Creating Value

<ul>
<li>From the perspective of voting criteria used by institutional investors, the 8% threshold for three-year average ROE still seems to be slightly too high as a hurdle for smaller-cap companies.</li>
<li>Rather than being hindered in improving ROE by policy-held shares, the more serious problem is the risk that management won't act in the best interests of shareholders, shielded by cross-shareholdings.</li>
<li>It's not “TSE's request” or Corporate Governance Code that will prompt management to change their ways and begin taking these issues seriously; only proxy voting can change management’s mindset.</li>
</ul>


From the perspective of voting criteria used by institutional investors, the 8% threshold for three-year average ROE still seems to be slightly too high as a hurdle for smaller-cap companies.
Rather than being hindered in improving ROE by policy-held shares, the more serious problem is the risk that management won't act in the best interests of shareholders, shielded by cross-shareholdings.
It's not “TSE's request” or Corporate Governance Code that will prompt management to change their ways and begin taking these issues seriously; only proxy voting can change management’s mindset.


Stricter Voting Guideline by Domestic Investors Will Push Managers to Return to Basics of Management

<ul>
<li>Given that the simple average ROE is 7.9%, more companies have profitability below their cost of capital. It's overly optimistic to assume that these companies could immediately improve their profitability.</li>
<li>Regardless of whether the company discloses information in response to requests, it should be held accountable for whether it is implementing measures to create value.</li>
<li>Without a shareholder perspective in corporate management, the disclosed measures will not serve the interests of shareholders but will merely be intended to comply with the Tokyo Stock Exchange’s requirements.</li>
</ul>


Given that the simple average ROE is 7.9%, more companies have profitability below their cost of capital. It's overly optimistic to assume that these companies could immediately improve their profitability.
Regardless of whether the company discloses information in response to requests, it should be held accountable for whether it is implementing measures to create value.
Without a shareholder perspective in corporate management, the disclosed measures will not serve the interests of shareholders but will merely be intended to comply with the Tokyo Stock Exchange’s requirements.


The Reason for No Improvement in ROE Was that the past 3 Years Lacked a Shareholder Perspective

<ul>
<li>Legislative amendments are planned to allow the board of directors to override decisions made by the statutory nomination committee if a majority of the board consists of outside directors.</li>
<li>If the Board of Directors can amend a director nomination proposal decided by an independent statutory nomination committee, how does this differ from the current system of voluntary nomination committees?</li>
<li>The starting point is for outside directors and executive directors to thoroughly discuss, at board meetings, what kind of skills and backgrounds the company needs in its personnel.</li>
</ul>


Legislative amendments are planned to allow the board of directors to override decisions made by the statutory nomination committee if a majority of the board consists of outside directors.
If the Board of Directors can amend a director nomination proposal decided by an independent statutory nomination committee, how does this differ from the current system of voluntary nomination committees?
The starting point is for outside directors and executive directors to thoroughly discuss, at board meetings, what kind of skills and backgrounds the company needs in its personnel.


Won’t Companies Fall into the Trap of Formalism when Amending Laws Just to Build a Track Record?

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>A review of recent events and data impacting our investment themes and outlook</li>
<li>US interest rate expectations continue to whip markets around, even as more cracks emerge in the AI trade.</li>
<li>Japan goes for broke with its latest budget and debt issuance.</li>
</ul>


A review of recent events and data impacting our investment themes and outlook
US interest rate expectations continue to whip markets around, even as more cracks emerge in the AI trade.
Japan goes for broke with its latest budget and debt issuance.


Overview #42 – What a Difference a Day Makes!

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

While % of Female Board Members Has Risen, Now Is Time to Ask Whether Companies Are Creating Value

I would like to discuss the issues on the June 11 Nikkei article titled “Proportion of Female Board Directors at Prime Market-Listed Companies...

Metrical Inc

Stricter Voting Guideline by Domestic Investors Will Push Managers to Return to Basics of Management

I would like to discuss the issues on the June 7 Nikkei article titled “Asset Management Companies and Trust Banks Tighten Voting Guidelines; 8%...

Metrical Inc

The Reason for No Improvement in ROE Was that the past 3 Years Lacked a Shareholder Perspective

I would like to discuss the issues on the Tokyo Stock Exchange disclosure document dated June 4 titled “Future Initiatives Regarding Management...

Metrical Inc

Won’t Companies Fall into the Trap of Formalism when Amending Laws Just to Build a Track Record?

I would like to discuss the issues on the Nikkei article dated May 29 titled “What Is the Core of Corporate Governance Reform?”

Metrical Inc

Overview #42 – What a Difference a Day Makes!

A review of recent events/data impacting our investment themes and outlook. Fed rate cuts, Japan spending and Lithium upgrades

Rikki Malik