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>Most companies have only made superficial improvements to meet numerical targets, and have not attempted to improve capital profitability or stock price valuation through improvements in board practices.</li>
<li>Very few companies proceed with uncodified practices based on company policy. Conversely, these companies demonstrate a willingness to change from their previous management style.</li>
<li>Previously, the idea of “treating shareholders equally with all other stakeholders” was widespread among many companies. As a result of “Stakeholderism,” capital profitability and stock price valuations have continued slow.</li>
</ul>


Most companies have only made superficial improvements to meet numerical targets, and have not attempted to improve capital profitability or stock price valuation through improvements in board practices.
Very few companies proceed with uncodified practices based on company policy. Conversely, these companies demonstrate a willingness to change from their previous management style.
Previously, the idea of “treating shareholders equally with all other stakeholders” was widespread among many companies. As a result of “Stakeholderism,” capital profitability and stock price valuations have continued slow.


With Most Companies Still Unable to Show Results, There Is No Returning to “Stakeholderism”

<ul>
<li>With nearly half of companies listed on TSE having a P/B ratio of less than 1, many investors are likely to question the appropriateness of executives receiving fixed remuneration.</li>
<li>Incorporating TSR into the compensation system will likely motivate companies to increase shareholder returns, which is a good thing if it leads to the return of unused cash to shareholders.</li>
<li>As long as fixed compensation remains high, there won't be much incentive to put a lot of cash into growth investments that boost corporate value.</li>
</ul>


With nearly half of companies listed on TSE having a P/B ratio of less than 1, many investors are likely to question the appropriateness of executives receiving fixed remuneration.
Incorporating TSR into the compensation system will likely motivate companies to increase shareholder returns, which is a good thing if it leads to the return of unused cash to shareholders.
As long as fixed compensation remains high, there won't be much incentive to put a lot of cash into growth investments that boost corporate value.


Will the Incorporation of TSR into the Remuneration System Affect Cash Allocation?

<ul>
<li>Since the government hasn't taken any actions, the birth rate has dropped much lower than expected, and the population is shrinking much faster than predicted.</li>
<li>There are various reasons why more people are choosing not to marry. It is necessary to implement policies that meet the needs of people with diverse views.</li>
<li>With the decline in working-age population, it is necessary to incorporate as many diverse people as possible into human capital to maximize the abilities of as many people as possible.</li>
</ul>


Since the government hasn't taken any actions, the birth rate has dropped much lower than expected, and the population is shrinking much faster than predicted.
There are various reasons why more people are choosing not to marry. It is necessary to implement policies that meet the needs of people with diverse views.
With the decline in working-age population, it is necessary to incorporate as many diverse people as possible into human capital to maximize the abilities of as many people as possible.


Amid Declining Birth Rates and Working-Age Populations, Japan Still Hesitates to Embrace Diversity

<ul>
<li>Companies that previously paid lower dividends compared to their cash on hand often adopt DOE or progressive dividends. In other words, they have too much cash on hand.</li>
<li>Both DOE and progressive dividends would suggest that management of free cash flow solely lies with the company, and that only cash exceeding a certain level is returned to shareholders.</li>
<li>Setting a predetermined limit on the allocation of free cash flow may hinder more dynamic cash flow allocation and risk-taking, resulting in limited shareholder returns.</li>
</ul>


Companies that previously paid lower dividends compared to their cash on hand often adopt DOE or progressive dividends. In other words, they have too much cash on hand.
Both DOE and progressive dividends would suggest that management of free cash flow solely lies with the company, and that only cash exceeding a certain level is returned to shareholders.
Setting a predetermined limit on the allocation of free cash flow may hinder more dynamic cash flow allocation and risk-taking, resulting in limited shareholder returns.


Is Progressive Dividend Distribution the Result of Half-Baked Cash Allocation?

<ul>
<li>It is obvious to everyone that digitization reduces costs. However, if few companies adopt digitization, trust banks that undertake shareholder management tasks will not make temporary investments for digitization.</li>
<li>With many companies wanting to distance themselves from shareholders, digitization and online services will unlikely accelerate even if legislation is enacted, at least until manual work reaches its limits.</li>
<li>The solution is to create an environment (setting the trading unit to one share) where it is burdensome to send AGM documents manually and count voting rights manually.</li>
</ul>


It is obvious to everyone that digitization reduces costs. However, if few companies adopt digitization, trust banks that undertake shareholder management tasks will not make temporary investments for digitization.
With many companies wanting to distance themselves from shareholders, digitization and online services will unlikely accelerate even if legislation is enacted, at least until manual work reaches its limits.
The solution is to create an environment (setting the trading unit to one share) where it is burdensome to send AGM documents manually and count voting rights manually.


Setting the Trading Unit to One Share Is the Quickest Way to Increase Virtual AGMs

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)

With Most Companies Still Unable to Show Results, There Is No Returning to “Stakeholderism”

I would like to discuss the issues on the Nikkei Shimbun article dated June 27, titled “Companies should enhance their corporate value by listening...

Metrical Inc

Will the Incorporation of TSR into the Remuneration System Affect Cash Allocation?

I would like to discuss the issues on the Nikkei article dated June 17, ““One in three major companies reflects investor returns in executive...

Metrical Inc

Amid Declining Birth Rates and Working-Age Populations, Japan Still Hesitates to Embrace Diversity

I would like to discuss the issues on the Nikkei article dated June 4 titled “Number of births in 2024 fell below 700,000 for the first time; birth...

Metrical Inc

Is Progressive Dividend Distribution the Result of Half-Baked Cash Allocation?

I would like to discuss the issues on the June 17 Nikkei newspaper article, “Progressive Dividends: Shareholder Returns Without Reducing Dividends,...

Metrical Inc

With Most Companies Still Unable to Show Results, There Is No Returning to “Stakeholderism”

I would like to discuss the issues on the Nikkei Shimbun article dated June 27, titled “Companies should enhance their corporate value by listening...

Metrical Inc

Will the Incorporation of TSR into the Remuneration System Affect Cash Allocation?

I would like to discuss the issues on the Nikkei article dated June 17, ““One in three major companies reflects investor returns in executive...

Metrical Inc

Amid Declining Birth Rates and Working-Age Populations, Japan Still Hesitates to Embrace Diversity

I would like to discuss the issues on the Nikkei article dated June 4 titled “Number of births in 2024 fell below 700,000 for the first time; birth...

Metrical Inc

Is Progressive Dividend Distribution the Result of Half-Baked Cash Allocation?

I would like to discuss the issues on the June 17 Nikkei newspaper article, “Progressive Dividends: Shareholder Returns Without Reducing Dividends,...

Metrical Inc

Setting the Trading Unit to One Share Is the Quickest Way to Increase Virtual AGMs

I would like to discuss the issues on the Nikkei article on June 20 titled “Shareholders' Meetings Lag Behind in Digitalization; Postal Fees Could...

Metrical Inc