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>Following the 2020 revision of Stewardship Code, domestic institutional investors have gradually increased their support for shareholder proposals. However, the rise in approval rates has paused in the 10% range.</li>
<li>Some investors adopt voting policy that allows them to support company proposals if the company's efforts are deemed commendable, even if numerical targets aren't met. This makes shareholder engagement important.</li>
<li>Given that conditions must align where a company has substantial foreign ownership and doesn't implement initiatives desired by investors, the approval rate for shareholder proposals is unlikely to rise significantly.</li>
</ul>


Following the 2020 revision of Stewardship Code, domestic institutional investors have gradually increased their support for shareholder proposals. However, the rise in approval rates has paused in the 10% range.
Some investors adopt voting policy that allows them to support company proposals if the company's efforts are deemed commendable, even if numerical targets aren't met. This makes shareholder engagement important.
Given that conditions must align where a company has substantial foreign ownership and doesn't implement initiatives desired by investors, the approval rate for shareholder proposals is unlikely to rise significantly.


For Both the Company and Investors, Pre-Negotiation Process as SR Is Becoming Increasingly Important

<ul>
<li>In response to calls from overseas investors to eliminate parent-subsidiary dual listings, the number of listed subsidiaries has decreased, while the number of equity-method affiliates has increased.</li>
<li>Some companies that found themselves with no wayout resorted to selling off part of their holdings to transition to equity method affiliates, for the time being, driven by herd mentality.</li>
<li>When considering investment strategies focused on parent-subsidiary listings, in the highly liquid Prime Market, equity method affiliates are more promising investment targets than the limited number of listed subsidiaries.</li>
</ul>


In response to calls from overseas investors to eliminate parent-subsidiary dual listings, the number of listed subsidiaries has decreased, while the number of equity-method affiliates has increased.
Some companies that found themselves with no wayout resorted to selling off part of their holdings to transition to equity method affiliates, for the time being, driven by herd mentality.
When considering investment strategies focused on parent-subsidiary listings, in the highly liquid Prime Market, equity method affiliates are more promising investment targets than the limited number of listed subsidiaries.


Combining Equity Method Affiliates and Founder Family Companies Provide Sufficient Number of Targets

<ul>
<li>Corporate Governance Code seems to be revised in ‘verifying and disclosing cash allocation’ in addition to ‘requests for disclosure in annual securities reports to enhance items related to human capital.’</li>
<li>This time, the disclosure request concerns cash allocation. Previously, disclosure regarding policy shareholdings was requested, but the elimination of cross-shareholdings did not progress smoothly.</li>
<li>The government plans to encourage growth investment in accumulated cash reserves without business plans for growth by strengthening disclosure rules and offering tax incentives.</li>
</ul>


Corporate Governance Code seems to be revised in ‘verifying and disclosing cash allocation’ in addition to ‘requests for disclosure in annual securities reports to enhance items related to human capital.’
This time, the disclosure request concerns cash allocation. Previously, disclosure regarding policy shareholdings was requested, but the elimination of cross-shareholdings did not progress smoothly.
The government plans to encourage growth investment in accumulated cash reserves without business plans for growth by strengthening disclosure rules and offering tax incentives.


Will Strengthened Disclosure Rules and Tax Incentives Drive Growth Investment?

<ul>
<li>In the activities of Nomination Committee, the formulation of policies and criteria for appointing directors, CEOs, as well as the consideration of succession plans, are given low priority.</li>
<li>With major shareholders holding over 20% stakes present in half of companies, implementing process where the board accepts the nomination committee's deliberated proposal on succession plans presents a significant hurdle.</li>
<li>The failure of nomination committees and independent outside directors, who constitute a majority in many companies, to fulfill their critical roles may be a significant hindrance to corporate growth.</li>
</ul>


In the activities of Nomination Committee, the formulation of policies and criteria for appointing directors, CEOs, as well as the consideration of succession plans, are given low priority.
With major shareholders holding over 20% stakes present in half of companies, implementing process where the board accepts the nomination committee's deliberated proposal on succession plans presents a significant hurdle.
The failure of nomination committees and independent outside directors, who constitute a majority in many companies, to fulfill their critical roles may be a significant hindrance to corporate growth.


With Many Parent/Founder-Family Companies, Effective Succession Planning Is a Difficult Task

<ul>
<li>The number of listed subsidiaries is decreasing, while equity-method affiliates are increasing. If parent-subsidiary listings are dissolved by selling part of equity interests, this doesn't lead to fundamental management reform.</li>
<li>While some companies have finally gotten off their backsides after seeing engagement results, the challenge is shifting to the many companies that refuse to seriously confront management reform.</li>
<li>Investors want confidence in which businesses generate and expand the company's overall cash flow. A serious business portfolio restructuring to provide that confidence remains only halfway complete.</li>
</ul>


The number of listed subsidiaries is decreasing, while equity-method affiliates are increasing. If parent-subsidiary listings are dissolved by selling part of equity interests, this doesn't lead to fundamental management reform.
While some companies have finally gotten off their backsides after seeing engagement results, the challenge is shifting to the many companies that refuse to seriously confront management reform.
Investors want confidence in which businesses generate and expand the company's overall cash flow. A serious business portfolio restructuring to provide that confidence remains only halfway complete.


Parent-Subsidiary Listing Focus: From Small-Scale Fixe to Real Reform, from Prime to Standard Market

Japan

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TSE Tokyo Price Index TOPIX (TPX INDEX)

For Both the Company and Investors, Pre-Negotiation Process as SR Is Becoming Increasingly Important

I would like to discuss the October 22 Nikkei article titled “Major Asset Managers See Shareholder Proposal Approval Rate Drop for First Time in...

Metrical Inc

Combining Equity Method Affiliates and Founder Family Companies Provide Sufficient Number of Targets

I would like to discuss the issues on the Nikkei article on October 20, 2025 “Parent-Subsidiary Listings Move to Next Phase; Overseas Investors...

Metrical Inc

Will Strengthened Disclosure Rules and Tax Incentives Drive Growth Investment?

I would like to discuss the Nikkei article dated October 18 titled “Listed Companies Face Accountability for Cash Usage as Financial Services...

Metrical Inc

With Many Parent/Founder-Family Companies, Effective Succession Planning Is a Difficult Task

I would like to discuss the issues on the October 17 Nikkei article titled Nomination Committees Discuss Succession Plans in Over 70% of Cases, but...

Metrical Inc

Parent-Subsidiary Listing Focus: From Small-Scale Fixe to Real Reform, from Prime to Standard Market

I would like to discuss the issues on the Nikkei article on October 7, “Parent-Subsidiary Listings Decline to Lowest Level in 36 Years as Corporate...

Metrical Inc