Japan Specialist

Mark Chadwick

Over 20 years experience in equities and asset management in Asia and Japan. Qualified CFA with experience analyzing companies as a buy-side analyst. In-depth knowledge of company fundamental analysis, corporate governance and valuations.

Japan Governance: Board Independence - Should We Care?

<div><p><span xml:lang="EN-US" data-contrast="none">There has been growing awareness of the business case for inclusion and diversity (I&amp;D) in the workplace. In Japan, Prime Minister Suga has pledged continued government support for corporate governance reform and he would like to see more </span><span xml:lang="EN-US" data-contrast="none">women</span><span xml:lang="EN-US" data-contrast="none"> and foreigners in key positions. While many companies cite I&amp;D as a source of competitive advantage and a key enabler of growth, few academic studies have been able to prove a direct link between I&amp;D and financial performance. Our analysis on Japan’s larger companies suggests the following:</span><span data-ccp-props='{"201341983":0,"335551550":6,"335551620":6,"335559739":160,"335559740":259}'> </span></p></div><div><ol style="list-style-type: decimal;" role="list" start="1"><li role="listitem" data-leveltext="%1." data-font="Calibri" data-listid="1" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1"><p><span xml:lang="EN-US" data-contrast="none">Most Japanese companies have very low levels of diversity. Although the participation of women on the boards of Japanese companies is expanding, those with higher levels of diversity are yet to see any improvement in financial metrics or stock performance. </span><span data-ccp-props='{"201341983":0,"335551550":6,"335551620":6,"335559739":160,"335559740":259}'> </span></p></li></ol></div><div><ol style="list-style-type: decimal;" role="list" start="2"><li role="listitem" data-leveltext="%1." data-font="Calibri" data-listid="1" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1"><p><span xml:lang="EN-US" data-contrast="none">Our broad composite index of board entrenchment also bears little correlation with key metrics. However, boards that are younger on average do appear to be more effective, and are correlated with a broad range of operating metrics. </span><span data-ccp-props='{"201341983":0,"335551550":6,"335551620":6,"335559739":160,"335559740":259}'> </span></p></li></ol></div>

There has been growing awareness of the business case for inclusion and diversity (I&amp;D) in the workplace. In Japan, Prime Minister Suga has pledged continued government support for corporate governance reform and he would like to see more women and foreigners in key positions. While many companies cite I&amp;D as a source of competitive advantage and a key enabler of growth, few academic studies have been able to prove a direct link between I&amp;D and financial performance. Our analysis on Japan’s larger companies suggests the following: Most Japanese companies have very low levels of diversity. Although the participation of women on the boards of Japanese companies is expanding, those with higher levels of diversity are yet to see any improvement in financial metrics or stock performance.  Our broad composite index of board entrenchment also bears little correlation with key metrics. However, boards that are younger on average do appear to be more effective, and are correlated with a broad range of operating metrics.  

CyberAgent Inc

Japan Governance - Diversity Matters