Category

ESG

Aug 10
0

Daily Brief ESG: The Ratio of Fixed Compensation in Executive Compensation Has Gradually Declined and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Ratio of Fixed Compensation in Executive Compensation Has Gradually Declined, but Remains High

The Ratio of Fixed Compensation in Executive Compensation Has Gradually Declined, but Remains High

By Aki Matsumoto

  • As global companies changing to increase the proportion of variable compensation from the perspective of securing human resources, the proportion of fixed compensation is gradually declining, but still high. 
  • Since only executives who receive compensation of 100 million yen or more are required to be disclosed in annual securities reports, few companies disclose the compensation of all directors individually. 
  • In addition to the inability to verify whether the remuneration paid was appropriate,　investors have doubts about the independence of the process by which the Remuneration Committee determines executive remuneration.

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Aug 09
0

Daily Brief ESG: With Passive Funds Dominating Markets Today and more

By | Daily Briefs, ESG

In today’s briefing:

  • With Passive Funds Dominating Markets Today, Proxy Voting Tends to Be Limited to Formalities

With Passive Funds Dominating Markets Today, Proxy Voting Tends to Be Limited to Formalities

By Aki Matsumoto

  • For asset management companies that mainly use passive funds, it is difficult to have sufficient dialogue with all portfolio companies equally in the environment where AGMs are concentrated in June.
  • As more companies focus on meeting formal voting guidelines, there is a risk that the goal of improving corporate value through management reforms will be put aside.
  • Solving individual management issues will lead to increased corporate value. However, due to physical reasons, not many companies engage in dialogue regarding individual management issues.

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Aug 08
0

Daily Brief ESG: With Most Companies Still Unable to Show Results and more

By | Daily Briefs, ESG

In today’s briefing:

  • With Most Companies Still Unable to Show Results, There Is No Returning to “Stakeholderism”

With Most Companies Still Unable to Show Results, There Is No Returning to “Stakeholderism”

By Aki Matsumoto

  • Most companies have only made superficial improvements to meet numerical targets, and have not attempted to improve capital profitability or stock price valuation through improvements in board practices.
  • Very few companies proceed with uncodified practices based on company policy. Conversely, these companies demonstrate a willingness to change from their previous management style.
  • Previously, the idea of “treating shareholders equally with all other stakeholders” was widespread among many companies. As a result of “Stakeholderism,” capital profitability and stock price valuations have continued slow.

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Aug 04
0

Daily Brief ESG: Will the Incorporation of TSR into the Remuneration System Affect Cash Allocation? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will the Incorporation of TSR into the Remuneration System Affect Cash Allocation?

Will the Incorporation of TSR into the Remuneration System Affect Cash Allocation?

By Aki Matsumoto

  • With nearly half of companies listed on TSE having a P/B ratio of less than 1, many investors are likely to question the appropriateness of executives receiving fixed remuneration.
  • Incorporating TSR into the compensation system will likely motivate companies to increase shareholder returns, which is a good thing if it leads to the return of unused cash to shareholders.
  • As long as fixed compensation remains high, there won’t be much incentive to put a lot of cash into growth investments that boost corporate value.

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Aug 02
0

Daily Brief ESG: Amid Declining Birth Rates and Working-Age Populations and more

By | Daily Briefs, ESG

In today’s briefing:

  • Amid Declining Birth Rates and Working-Age Populations, Japan Still Hesitates to Embrace Diversity

Amid Declining Birth Rates and Working-Age Populations, Japan Still Hesitates to Embrace Diversity

By Aki Matsumoto

  • Since the government hasn’t taken any actions, the birth rate has dropped much lower than expected, and the population is shrinking much faster than predicted.
  • There are various reasons why more people are choosing not to marry. It is necessary to implement policies that meet the needs of people with diverse views.
  • With the decline in working-age population, it is necessary to incorporate as many diverse people as possible into human capital to maximize the abilities of as many people as possible.

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Jul 31
0

Daily Brief ESG: Is Progressive Dividend Distribution the Result of Half-Baked Cash Allocation? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Is Progressive Dividend Distribution the Result of Half-Baked Cash Allocation?

Is Progressive Dividend Distribution the Result of Half-Baked Cash Allocation?

By Aki Matsumoto

  • Companies that previously paid lower dividends compared to their cash on hand often adopt DOE or progressive dividends. In other words, they have too much cash on hand.
  • Both DOE and progressive dividends would suggest that management of free cash flow solely lies with the company, and that only cash exceeding a certain level is returned to shareholders.
  • Setting a predetermined limit on the allocation of free cash flow may hinder more dynamic cash flow allocation and risk-taking, resulting in limited shareholder returns.

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Jul 29
0

Daily Brief ESG: Indian Banking’s Longest-Serving and more

By | Daily Briefs, ESG

In today’s briefing:

  • Indian Banking’s Longest-Serving, Highest-Paid HR-Head Quits IndusInd Bank
  • Setting the Trading Unit to One Share Is the Quickest Way to Increase Virtual AGMs

Indian Banking’s Longest-Serving, Highest-Paid HR-Head Quits IndusInd Bank

By Hemindra Hazari

  • Zubin Mody, Chief Human Resources Officer (CHRO) abruptly quits Indusind Bank (IIB IN)
  • His resignation adds to the leadership vacuum at the top as the bank has no CEO or any executive directors on the board
  • Apparently the board of directors wants to reboot the bank with a clean senior executive slate

Setting the Trading Unit to One Share Is the Quickest Way to Increase Virtual AGMs

By Aki Matsumoto

  • It is obvious to everyone that digitization reduces costs. However, if few companies adopt digitization, trust banks that undertake shareholder management tasks will not make temporary investments for digitization.
  • With many companies wanting to distance themselves from shareholders, digitization and online services will unlikely accelerate even if legislation is enacted, at least until manual work reaches its limits.
  • The solution is to create an environment (setting the trading unit to one share) where it is burdensome to send AGM documents manually and count voting rights manually.

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Jul 28
0

Daily Brief ESG: How Many Companies Will Be Able to Keep up with the Next Revision of the Corporate Governance Code? and more

By | Daily Briefs, ESG

In today’s briefing:

  • How Many Companies Will Be Able to Keep up with the Next Revision of the Corporate Governance Code?

How Many Companies Will Be Able to Keep up with the Next Revision of the Corporate Governance Code?

By Aki Matsumoto

  • It seems unlikely that there’ll be an increase in formal criteria for corporate governance, like in the previous revision. It looks like there’ll be more demand for human capital disclosure.
  • Many companies don’t fully understand human capital, and there’s concern that achieving disclosure criteria will become the goal, rather than original objective of investing in human capital to create value.
  • The revised Corporate Governance Code requires verification that management resources are being appropriately allocated to investment and shareholder returns. It seems that simpler questions are better than difficult “technical terms.”

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Jul 25
0

Daily Brief ESG: The Data Also Shows that Companies with Low Stock Valuations Are Increasingly Using Share Buybacks and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Data Also Shows that Companies with Low Stock Valuations Are Increasingly Using Share Buybacks

The Data Also Shows that Companies with Low Stock Valuations Are Increasingly Using Share Buybacks

By Aki Matsumoto

  • Data suggests that share buybacks/share cancellations are expected to have positive effect on ROE/ROA, while companies with low valuations increasingly utilize share buybacks as a measure to raise stock prices.
  • Overseas investors share the value that companies should have business plans for growth and return surplus cash after investment to shareholders. There’s gap between investors and companies inn this value.
  • More effective approach would be to require management to fulfill accountability by explaining fundamentals of returning unused cash to shareholders and disclosing business plans if they wish to retain cash.

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Jul 23
0

Daily Brief ESG: Proxy Voting at AGMs Is Good Opportunity for Investors to Think if Managers Fulfill Fiduciary Duties and more

By | Daily Briefs, ESG

In today’s briefing:

  • Proxy Voting at AGMs Is Good Opportunity for Investors to Think if Managers Fulfill Fiduciary Duties

Proxy Voting at AGMs Is Good Opportunity for Investors to Think if Managers Fulfill Fiduciary Duties

By Aki Matsumoto

  • Although corporate governance in Japan has gradually improved over the past decade, many listed companies have failed to achieve their management goal of sustainable growth in corporate value.
  • TSE seems to believe that the underlying problem is that management does not recognize “capital costs” and is therefore unable to concentrate resources on businesses that can secure sufficient margins.
  • I believe that the problem stems from a lack of awareness that free cash flow belongs to shareholders and that companies have a fiduciary duty to shareholders.

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