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>I would like to have figures to see how far the corporate governance has been enhanced as a result of the efforts of companies for 2021.</li>
<li>The ratio of independent directors and Nomination and Compensation Committees, which were specifically mentioned in the revised Corporate Governance Code as areas for improvement, have been improved.</li>
<li>Items that weren't specifically mentioned in the revised Corporate Governance Code as requiring improvement, such as chair of board, female directors, and anti-takeover measures, were evaluated with only limited improvement.</li>
</ul>


I would like to have figures to see how far the corporate governance has been enhanced as a result of the efforts of companies for 2021.
The ratio of independent directors and Nomination and Compensation Committees, which were specifically mentioned in the revised Corporate Governance Code as areas for improvement, have been improved.
Items that weren't specifically mentioned in the revised Corporate Governance Code as requiring improvement, such as chair of board, female directors, and anti-takeover measures, were evaluated with only limited improvement.


Japan's Governance: How Far Has Corporate Governance Progressed in 2021? (1)

<ul>
<li>It would be reasonable to hypothesize that companies with takeover defense measures generally lack a clear growth policy and fail to communicate such a growth policy to investors.</li>
<li>With regard to Growth Policy and Capital Allocation Policy and Disclosures, the analysis of companies with and without anti-takeover measures revealed a clear difference.</li>
<li>Companies with anti-takeover lack robust growth policy and capital allocation to increase corporate value and fail to communicate the policy to investors, resulting in lower foreign shareholders, low market cap.</li>
</ul>


It would be reasonable to hypothesize that companies with takeover defense measures generally lack a clear growth policy and fail to communicate such a growth policy to investors.
With regard to Growth Policy and Capital Allocation Policy and Disclosures, the analysis of companies with and without anti-takeover measures revealed a clear difference.
Companies with anti-takeover lack robust growth policy and capital allocation to increase corporate value and fail to communicate the policy to investors, resulting in lower foreign shareholders, low market cap.


Japan's Governance: What's Behind the Underperformance of Companies with Takeover Defenses?

<ul>
<li>23 companies that have not been confirmed to have proposed anti-takeover measures at AGM since 2014, but have anti-takeover, include companies with high P/B, but not superior ROE and ROA.</li>
<li>The market capitalization of the 271 companies that have takeover defense measures shows that many of them are relatively small companies.</li>
<li>The stock price performance of the 271 companies that still have takeover defenses has underperformed their respective stock indices, which means that their market capitalization has not expanded.</li>
</ul>


23 companies that have not been confirmed to have proposed anti-takeover measures at AGM since 2014, but have anti-takeover, include companies with high P/B, but not superior ROE and ROA.
The market capitalization of the 271 companies that have takeover defense measures shows that many of them are relatively small companies.
The stock price performance of the 271 companies that still have takeover defenses has underperformed their respective stock indices, which means that their market capitalization has not expanded.


Japan's Governance: What Kind of Firm Adopts Takeover Defenses? What Is the Stock Price Performance?

<ul>
<li>Of the companies that have proposed anti-takeover measures on their shareholder agenda since 2014, 42% have withdrawn their anti-takeover measures.</li>
<li>There is clear difference in performance between companies that still have anti-takeover measures and those that have dropped the measures, and there is also clear difference in corporate governance practices</li>
<li>The market capitalization of companies that still have anti-takeover provisions is small. This would relate to combination of factors such as lack of robust growth strategy and communications to investors.</li>
</ul>


Of the companies that have proposed anti-takeover measures on their shareholder agenda since 2014, 42% have withdrawn their anti-takeover measures.
There is clear difference in performance between companies that still have anti-takeover measures and those that have dropped the measures, and there is also clear difference in corporate governance practices
The market capitalization of companies that still have anti-takeover provisions is small. This would relate to combination of factors such as lack of robust growth strategy and communications to investors.


Japan's Governance: Takeover Defense Update

<ul>
<li>The "lead independent outside director" is one of the most overlooked items in the Corporate Governance Code.</li>
<li>While few companies have lead independent outside director, many companies are compliant with the Code because they are able to "establish a system for collaboration" and therefore have no problems.</li>
<li>In the Code, lead independent outside director isn't specifically listed as the person who will be involved in dialogue with shareholders, but auditors are added in addition to outside directors.</li>
</ul>


The "lead independent outside director" is one of the most overlooked items in the Corporate Governance Code.
While few companies have lead independent outside director, many companies are compliant with the Code because they are able to "establish a system for collaboration" and therefore have no problems.
In the Code, lead independent outside director isn't specifically listed as the person who will be involved in dialogue with shareholders, but auditors are added in addition to outside directors.


Japan's Governance: Revised Corporate Governance Code: Overlooked "Lead Independent Director"

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: How Far Has Corporate Governance Progressed in 2021? (1)

The Corporate Governance Code has been revised for 2021. This article will review how far listed companies have progressed in their efforts to...

Metrical Inc

Japan's Governance: What's Behind the Underperformance of Companies with Takeover Defenses?

From this analysis, the growth policy of companies with anti-takeover provisions is not clear, and there is problem with effective use of these...

Metrical Inc

Japan's Governance: What Kind of Firm Adopts Takeover Defenses? What Is the Stock Price Performance?

I have hypothesized companies that still had anti-takeover provisions would have modest pace of market cap expansion. This stock performance...

Metrical Inc

Japan's Governance: Takeover Defense Update

This analysis shows the poor performance of companies that still have anti-takeover provisions and the small market capitalization of such...

Metrical Inc

Japan's Governance: Revised Corporate Governance Code: Overlooked "Lead Independent Director"

Lead independent outside director is one of the most overlooked items in the Corporate Governance Code. This revision didn't specifically require...

Metrical Inc