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 with voluntary nomination committees have majority of committee members as outside directors, and two-thirds have outside directors as chairpersons, but it's difficult to establish a statutory nomination committee.</li>
<li>It's unclear whether voluntary nomination committee can make proactive proposals or whether it simply follows proposals made by CEO, and to how much influence the decisions of voluntary committee have.</li>
<li>More than half of listed companies have former presidents and other executives serving as advisors or consultants. Concerns remain that former board directors may still be involved in management.</li>
</ul>


Most companies with voluntary nomination committees have majority of committee members as outside directors, and two-thirds have outside directors as chairpersons, but it's difficult to establish a statutory nomination committee.
It's unclear whether voluntary nomination committee can make proactive proposals or whether it simply follows proposals made by CEO, and to how much influence the decisions of voluntary committee have.
More than half of listed companies have former presidents and other executives serving as advisors or consultants. Concerns remain that former board directors may still be involved in management.


Companies Formalized Independence of Voluntary Nomination Committees, but No Signs of Improvements

<ul>
<li>Although the ratio of independent directors has increased over the past 10 years, the reality is that many people believe that corporate governance has not improved in substance.</li>
<li>In order to ensure diversity on the board of directors (as a measure for director appointment proposals), there is a growing trend for companies to hire a third independent director.</li>
<li>The role of independent directors is becoming increasingly important. In this context, focus is also being placed on independent directors who hold concurrent positions as executives at other companies.</li>
</ul>


Although the ratio of independent directors has increased over the past 10 years, the reality is that many people believe that corporate governance has not improved in substance.
In order to ensure diversity on the board of directors (as a measure for director appointment proposals), there is a growing trend for companies to hire a third independent director.
The role of independent directors is becoming increasingly important. In this context, focus is also being placed on independent directors who hold concurrent positions as executives at other companies.


The Stage of Maintaining Appearance by Ensuring Attendance of Independent Directors Has Ended

<ul>
<li>Since the number of companies transitioning to US Type 3 Committees isn't increasing, a perverse debate has begun on weakening the authority of nomination committees in US Type 3 Committees.</li>
<li>Despite calls from investors to appoint outside directors as chairpersons of BODs to stimulate discussion and strengthen supervisory functions by separating supervision from execution, these calls have been ignored.</li>
<li>If the board of directors simply approves plans created by each business division based on their budgets, then it is not involved in important company decisions.</li>
</ul>


Since the number of companies transitioning to US Type 3 Committees isn't increasing, a perverse debate has begun on weakening the authority of nomination committees in US Type 3 Committees.
Despite calls from investors to appoint outside directors as chairpersons of BODs to stimulate discussion and strengthen supervisory functions by separating supervision from execution, these calls have been ignored.
If the board of directors simply approves plans created by each business division based on their budgets, then it is not involved in important company decisions.


Both Statutory Nomination Committee and BODs Chaired by Outside Directors Are in the 2% Range

<ul>
<li>The fact that 59.2% of companies have March fiscal year-end and concentrate AGMs in the last week of June, preventing shareholders from attending AGMs, is a fundamental corporate governance issue.</li>
<li>Companies with foreign shareholdings of over 30% represent 17.4% of prime market. Most companies continue to run without a sense of urgency and without much influence from overseas investors.</li>
<li>While the number of listed subsidiaries has decreased over the past decade, the number of equity method affiliates has increased significantly. The business portfolio has not yet been fundamentally restructured.</li>
</ul>


The fact that 59.2% of companies have March fiscal year-end and concentrate AGMs in the last week of June, preventing shareholders from attending AGMs, is a fundamental corporate governance issue.
Companies with foreign shareholdings of over 30% represent 17.4% of prime market. Most companies continue to run without a sense of urgency and without much influence from overseas investors.
While the number of listed subsidiaries has decreased over the past decade, the number of equity method affiliates has increased significantly. The business portfolio has not yet been fundamentally restructured.


Governance Issues Have Not Been Resolved as Far as Profiles of TSE-Listed Companies Shows

<ul>
<li>The reason why many companies have previously rejected requests by overseas investors to meet with outside directors is that they've prioritized information control over constructive dialogue with shareholders and investors.</li>
<li>The fact that companies begun to provide opportunities for communication with outside directors will hopefully lead to shifts in value-creating management, but it'll not easy to spread to many companies.</li>
<li>Even if more companies provide opportunities for communication between outside directors and investors in the future, dialogue with unskilled outside directors will not be fruitful.</li>
</ul>


The reason why many companies have previously rejected requests by overseas investors to meet with outside directors is that they've prioritized information control over constructive dialogue with shareholders and investors.
The fact that companies begun to provide opportunities for communication with outside directors will hopefully lead to shifts in value-creating management, but it'll not easy to spread to many companies.
Even if more companies provide opportunities for communication between outside directors and investors in the future, dialogue with unskilled outside directors will not be fruitful.


A Dialogue with a Skilled Outside Director Will Create Value. This Premise Is Important

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)

Companies Formalized Independence of Voluntary Nomination Committees, but No Signs of Improvements

I would like to discuss the issues on the “Corporate Governance White Paper 2025” material disclosed by the TSE on May 26.

Metrical Inc

The Stage of Maintaining Appearance by Ensuring Attendance of Independent Directors Has Ended

I would like to discuss the issues on the “Corporate Governance White Paper 2025” material disclosed by the TSE on May 26.

Metrical Inc

Both Statutory Nomination Committee and BODs Chaired by Outside Directors Are in the 2% Range

I would like to discuss the issues on the “Corporate Governance White Paper 2025” material disclosed by the TSE on May 26.

Metrical Inc

Governance Issues Have Not Been Resolved as Far as Profiles of TSE-Listed Companies Shows

I would like to discuss the issues on the “Corporate Governance White Paper 2025” material disclosed by the TSE on May 26.

Metrical Inc

A Dialogue with a Skilled Outside Director Will Create Value. This Premise Is Important

I would like to discuss the issues on the May 22 Nikkei article, “Dialogue between Outside Directors and Investors Doubles in Three Years. NEC,...

Metrical Inc