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>Although the dates of AGMs are gradually becoming more spread out, the number of companies holding their AGMs on the top concentrated 3 days account for 64.7%.</li>
<li>Early online disclosure of convocation notices is progressing, but sending them out up to 3 weeks in advance has not progressed very well.</li>
<li>The use of electronic voting platforms is progressing among listed companies in the prime market, where this matter is included in the listing criteria.</li>
</ul>


Although the dates of AGMs are gradually becoming more spread out, the number of companies holding their AGMs on the top concentrated 3 days account for 64.7%.
Early online disclosure of convocation notices is progressing, but sending them out up to 3 weeks in advance has not progressed very well.
The use of electronic voting platforms is progressing among listed companies in the prime market, where this matter is included in the listing criteria.


Japan's Governance: Trends in AGMs of Companies with Fiscal Years Ending in March

<ul>
<li>In Japanese companies, where the overwhelming majority of directors are internal executive directors, independent directors who are in the minority tend to be referred to as outside directors.</li>
<li>There are concerns about whether a company's board that doesn’t embrace diverse values can sustain growth, and whether there is risk that growth will be hampered by lack of diversity.</li>
<li>The tendency of companies to hire friends as outside directors and to require them to play role in endorsing the executive's-management shows an aspect of reluctance to embrace diverse values.</li>
</ul>


In Japanese companies, where the overwhelming majority of directors are internal executive directors, independent directors who are in the minority tend to be referred to as outside directors.
There are concerns about whether a company's board that doesn’t embrace diverse values can sustain growth, and whether there is risk that growth will be hampered by lack of diversity.
The tendency of companies to hire friends as outside directors and to require them to play role in endorsing the executive's-management shows an aspect of reluctance to embrace diverse values.


Japan's Governance: About the Article on Outside Directors (2)

<ul>
<li>Nikkei article of March 18 titled "Prime Market Listed Companies Reel in ESG, Increase Value with 'Non-Financial.'" I considered the issues in the article in reference to my previous article.</li>
<li>The prime market has limited investment targets because their market caps are mostly smaller for institutions, and their profitability needs further improvement, and valuations remain low in line with this.</li>
<li>It’s reasonable to consider the portion of market-cap exceeding net assets as "goodwill,"  source of earning power and growth potential that has a more direct impact on future cash flows.</li>
</ul>


Nikkei article of March 18 titled "Prime Market Listed Companies Reel in ESG, Increase Value with 'Non-Financial.'" I considered the issues in the article in reference to my previous article.
The prime market has limited investment targets because their market caps are mostly smaller for institutions, and their profitability needs further improvement, and valuations remain low in line with this.
It’s reasonable to consider the portion of market-cap exceeding net assets as "goodwill,"  source of earning power and growth potential that has a more direct impact on future cash flows.


Japan's Governance: About an Article on Prime Market Listed Companies

<ul>
<li>Although the debate over the elimination of quarterly disclosures has resurfaced, it is likely that quarterly disclosures will continue by consolidating financial disclosure documents into a single document.</li>
<li>There were concerns that TSE stock trading volume would decline if quarterly disclosure were abolished, based on the poorly reasoned argument that "quarterly disclosure encourages short termism among investors."</li>
<li>Financial Summary is required to disclose information promptly for "importance of disclosing information on investment decisions." Quarterly Securities Report is required as a legal document for "reliability of financial statements."</li>
</ul>


Although the debate over the elimination of quarterly disclosures has resurfaced, it is likely that quarterly disclosures will continue by consolidating financial disclosure documents into a single document.
There were concerns that TSE stock trading volume would decline if quarterly disclosure were abolished, based on the poorly reasoned argument that "quarterly disclosure encourages short termism among investors."
Financial Summary is required to disclose information promptly for "importance of disclosing information on investment decisions." Quarterly Securities Report is required as a legal document for "reliability of financial statements."


Japan's Governance: About an Article on Quarterly Disclosure Controversy

<ul>
<li>I would like to consider the issues in the Nikkei article regarding outside directors, based on a survey by Ministry of Economy, Trade and Industry.</li>
<li>Compensation for outside directors is on the rise, but it’s higher for larger companies and differs from that of medium-sized companies. There are also issues regarding the disclosure of compensation.</li>
<li>Personal ties to management is the motivation for 22% of respondents to become outside directors. There is also gap between what the company seeks and what the outside director thinks.</li>
</ul>


I would like to consider the issues in the Nikkei article regarding outside directors, based on a survey by Ministry of Economy, Trade and Industry.
Compensation for outside directors is on the rise, but it’s higher for larger companies and differs from that of medium-sized companies. There are also issues regarding the disclosure of compensation.
Personal ties to management is the motivation for 22% of respondents to become outside directors. There is also gap between what the company seeks and what the outside director thinks.


Japan's Governance: About the Article on Outside Directors

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)

Japan's Governance: Trends in AGMs of Companies with Fiscal Years Ending in March

TSE disclosed on April 25 a document titled "Trends in AGMs of Companies with Fiscal Year-End March 31, 2022," and I would like to discuss the...

Metrical Inc

Japan's Governance: About the Article on Outside Directors (2)

the Nikkei Shimbun on February 28 published an article titled "Is 'Objectivity' Necessary for Outside Directors?" and I have considered the issues.

Metrical Inc

Japan's Governance: About an Article on Prime Market Listed Companies

Nikkei article of March 18 titled "Prime Market Listed Companies Reel in ESG, Increase Value with 'Non-Financial.'" I would like to discuss the...

Metrical Inc

Japan's Governance: About an Article on Quarterly Disclosure Controversy

On March 25, the Nikkei Shimbun published an article titled "Considering unification of financial disclosure documents; government to maintain...

Metrical Inc

Japan's Governance: About the Article on Outside Directors

I would like to consider the issues in the Nikkei article regarding "the level of demands on outside directors is rising," based on a survey by...

Metrical Inc