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>In many cases, women are promoted as non-statutory executive officers, and there're very few women in positions where they can be involved in making decisions about the company's management policies.</li>
<li>The bias toward women in family work, such as childbirth and child rearing, leads to women leaving workforce, and their shorter tenure has resulted in fewer women in managerial positions.</li>
<li>Female executives who have been appointed after overcoming various difficulties and gaining “experience” are loss to the company, as they face the wall of homogeneity of the senior male community.</li>
</ul>


In many cases, women are promoted as non-statutory executive officers, and there're very few women in positions where they can be involved in making decisions about the company's management policies.
The bias toward women in family work, such as childbirth and child rearing, leads to women leaving workforce, and their shorter tenure has resulted in fewer women in managerial positions.
Female executives who have been appointed after overcoming various difficulties and gaining “experience” are loss to the company, as they face the wall of homogeneity of the senior male community.


The Key Is to Solve the Root Problem of Women Leaving Their Jobs Due to the Bias of Family Work

<ul>
<li>It's not desirable for shareholders to have outside directors who are comfortable and remain in office for a long period of time while they are expected to fulfill their duties.</li>
<li>The high demand for outside directors of the same senior generation as inside directors has led to a situation in which senior outside directors hold positions at several companies.</li>
<li>There are few competent young talents to take on the job of outside director among the senior, all-male, internal board directors who are under strong peer pressure.</li>
</ul>


It's not desirable for shareholders to have outside directors who are comfortable and remain in office for a long period of time while they are expected to fulfill their duties.
The high demand for outside directors of the same senior generation as inside directors has led to a situation in which senior outside directors hold positions at several companies.
There are few competent young talents to take on the job of outside director among the senior, all-male, internal board directors who are under strong peer pressure.


The Bigger Issue than the Lack of Higher Compensation for Outside Board Directors Is...

<ul>
<li>A benefit of inflation was expected to shift from management that accumulates cash to management that proactively uses cash. However, it's been used for shareholder returns but less for apex.</li>
<li>Hitachi is one of few companies that manage business in disciplined manner and execute the necessary growth investments. This is more result of overseas investor engagement than corporate governance reform.</li>
<li>The key to Japanese equities outperformance is whether management can change to mindset that investors want to see “positive investment and the ability to implement measures to expand corporate value."</li>
</ul>


A benefit of inflation was expected to shift from management that accumulates cash to management that proactively uses cash. However, it's been used for shareholder returns but less for apex.
Hitachi is one of few companies that manage business in disciplined manner and execute the necessary growth investments. This is more result of overseas investor engagement than corporate governance reform.
The key to Japanese equities outperformance is whether management can change to mindset that investors want to see “positive investment and the ability to implement measures to expand corporate value."


The Key to Japanese Equity Outperformance Is a Step Beyond Shareholder Returns

<ul>
<li>It'll be interesting on whether shareholder proposals will be passed in companies with larger market capitalization and larger institutional investor ownership, which will be the main battleground for activist investors.</li>
<li>There are so many companies that are not creating the value they should be, it is no wonder that any company becomes a target for activist investors.</li>
<li>As activist funds' AUM grows, their approach is likely to focus more on overall assets that are not being used effectively, such as cash, real estate, equities, and non-core businesses.</li>
</ul>


It'll be interesting on whether shareholder proposals will be passed in companies with larger market capitalization and larger institutional investor ownership, which will be the main battleground for activist investors.
There are so many companies that are not creating the value they should be, it is no wonder that any company becomes a target for activist investors.
As activist funds' AUM grows, their approach is likely to focus more on overall assets that are not being used effectively, such as cash, real estate, equities, and non-core businesses.


Activist Investors Will Focus Their Approach More on Whole Assets that Aren't Being Used Effectively

<ul>
<li>An increasing number of companies had eliminated shareholder benefit plans, but reducing cross-shareholdings and caution toward activist investors may have been the motivating factors in the reversal of this trend.</li>
<li>If managers distract from management reform by gaining the support of individual investors through shareholder benefits, the stock benefit program will become a pseudo cross-shareholding.</li>
<li>Shareholder benefit programs and shareholder returns cannot be compared in the same manner. Companies shouldn't underestimate the fact that the problem with this lies in “principle of equality of shareholders."</li>
</ul>


An increasing number of companies had eliminated shareholder benefit plans, but reducing cross-shareholdings and caution toward activist investors may have been the motivating factors in the reversal of this trend.
If managers distract from management reform by gaining the support of individual investors through shareholder benefits, the stock benefit program will become a pseudo cross-shareholding.
Shareholder benefit programs and shareholder returns cannot be compared in the same manner. Companies shouldn't underestimate the fact that the problem with this lies in “principle of equality of shareholders."


Attention Should Be Paid to Whether the Pseudo Cross-Shareholdings Will Hinder Management Reform

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 Key Is to Solve the Root Problem of Women Leaving Their Jobs Due to the Bias of Family Work

I would like to discuss the issues on the March 17 Nikkei article, “Female Born and Bred Executives Increased 1.5 Times."

Metrical Inc

The Bigger Issue than the Lack of Higher Compensation for Outside Board Directors Is...

I would like to discuss the Nikkei article of March 15, “Outside Board Directors: 10% of Directors Close to 10 Years in Office; Monitoring Lax."

Metrical Inc

The Key to Japanese Equity Outperformance Is a Step Beyond Shareholder Returns

I would like to discuss the issues on the March 14 Nikkei article, “Japan as number 2, overseas investors bet on Japanese stock reform."

Metrical Inc

Activist Investors Will Focus Their Approach More on Whole Assets that Aren't Being Used Effectively

I would like to discuss the issues on the March 13 Nikkei newspaper article, “40 Companies Targeted by Activist Shareholders.”

Metrical Inc

Attention Should Be Paid to Whether the Pseudo Cross-Shareholdings Will Hinder Management Reform

I would like to discuss the issues on the March 10 Nikkei article, “Shareholder Benefit Programs Have Low-Cost and Stock Price Support Effects.”

Metrical Inc