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 adoption of female directors is growing as Japanese investment managers follow the movement among overseas investment managers to oppose proposals for election of directors for companies without female directors.</li>
<li>In Japanese companies, where peer pressure is strong, it is doubtful that the opinions of about 10% female directors can be fully reflected in the discussions and conclusions.</li>
<li>Non-Japanese directors who don’t succumb to Japan's culture of peer pressure is even smaller, and Japanese companies will be at risk if they determine management strategy without diverse values.</li>
</ul>


The adoption of female directors is growing as Japanese investment managers follow the movement among overseas investment managers to oppose proposals for election of directors for companies without female directors.
In Japanese companies, where peer pressure is strong, it is doubtful that the opinions of about 10% female directors can be fully reflected in the discussions and conclusions.
Non-Japanese directors who don’t succumb to Japan's culture of peer pressure is even smaller, and Japanese companies will be at risk if they determine management strategy without diverse values.


The Issue of Board Diversity Is Being Asked Anew

<ul>
<li>While 90% of the companies listed on the prime market translate some documents into English, very few companies listed on other markets translate their disclosure documents into English.</li>
<li>There is a mismatch between the documents that prime market listed companies translate into English and the documents that overseas institutional investors require to be translated into English.</li>
<li>Few companies with high foreign ownerships have translated their annual securities reports, convocation notices (business reports) and corporate governance reports into English, which overseas investors need to translate into English.</li>
</ul>


While 90% of the companies listed on the prime market translate some documents into English, very few companies listed on other markets translate their disclosure documents into English.
There is a mismatch between the documents that prime market listed companies translate into English and the documents that overseas institutional investors require to be translated into English.
Few companies with high foreign ownerships have translated their annual securities reports, convocation notices (business reports) and corporate governance reports into English, which overseas investors need to translate into English.


Mismatch Between Documents Needed by Foreign Investors and Those Translated in English by Companies

<ul>
<li>The inclusion of the requirement to use e-voting platforms in the Corporate Governance Code has led to increasing number of companies using e-voting platforms.</li>
<li>The number of participating companies has increased from 1,540 in March to 1,737 in August. Of the companies participating in e-voting platform, 92% are listed companies in the prime market.</li>
<li>It is only to be hoped that in the future, companies will focus on improving communication between shareholders and management at general shareholders' meetings.</li>
</ul>


The inclusion of the requirement to use e-voting platforms in the Corporate Governance Code has led to increasing number of companies using e-voting platforms.
The number of participating companies has increased from 1,540 in March to 1,737 in August. Of the companies participating in e-voting platform, 92% are listed companies in the prime market.
It is only to be hoped that in the future, companies will focus on improving communication between shareholders and management at general shareholders' meetings.


It Is Hoped that the Content of Shareholder Meetings Will Be Enhanced in the Future

<ul>
<li>The reason for this criticism is that the performance of mutual funds with ESG investing in their names have not differed from or underperformed stock market indices.</li>
<li>The FSA report indicates that some investment management companies that manage mutual funds with ESG names do not have sufficient specialized ESG departments and professionals.</li>
<li>Nissay Asset Management's guidelines seem reasonable. How to reflect them in investment performance in the future is a very difficult and key issue.</li>
</ul>


The reason for this criticism is that the performance of mutual funds with ESG investing in their names have not differed from or underperformed stock market indices.
The FSA report indicates that some investment management companies that manage mutual funds with ESG names do not have sufficient specialized ESG departments and professionals.
Nissay Asset Management's guidelines seem reasonable. How to reflect them in investment performance in the future is a very difficult and key issue.


After Developing Guidelines for ESG Investing, the Challenge Is How to Reflect Them in Performance

<ul>
<li>The reason why TCFD's progress is the slowest is that prudent companies are still exploring the minimum line that should be taken by other companies to see how they’re responding.</li>
<li>The lack of specific numerical targets for ensuring diversity, which are not explicitly stated in the Corporate Governance Code, is the main reason for the slow progress.</li>
<li>While some formal progress has been made, such as the establishment of nominating/compensation committees, there are many challenges ahead. Scandals have occurred even in companies that have implemented formal standards.</li>
</ul>


The reason why TCFD's progress is the slowest is that prudent companies are still exploring the minimum line that should be taken by other companies to see how they’re responding.
The lack of specific numerical targets for ensuring diversity, which are not explicitly stated in the Corporate Governance Code, is the main reason for the slow progress.
While some formal progress has been made, such as the establishment of nominating/compensation committees, there are many challenges ahead. Scandals have occurred even in companies that have implemented formal standards.


It Is Crucial that Corporate Governance Practices that Are Formally in Place Actually Function

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)

The Issue of Board Diversity Is Being Asked Anew

I would like to discuss the issues regarding the Nikkei article, "Outside Director Nominees, Women, etc., Competing for the Top Spot, Concerns Over...

Metrical Inc

Mismatch Between Documents Needed by Foreign Investors and Those Translated in English by Companies

The TSE disclosed the Survey of the Status of Disclosure in English as of the end of July 2022 on August 3, 2022, and I would like to discuss the...

Metrical Inc

It Is Hoped that the Content of Shareholder Meetings Will Be Enhanced in the Future

I would like to discuss the issues regarding the Nikkei article, "Online voting exceeded written voting for the first time at the June...

Metrical Inc

After Developing Guidelines for ESG Investing, the Challenge Is How to Reflect Them in Performance

I would like to discuss the issues on the Nikkei article, "Nissay Asset Management formulated the guidelines in response to criticism that many ESG...

Metrical Inc

It Is Crucial that Corporate Governance Practices that Are Formally in Place Actually Function

I would like to discuss the issues regarding the Nikkei article on "the status of compliance with the Corporate Governance Code by companies listed...

Metrical Inc