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.

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.

<ul>
<li>As the influence of foreign investors grows, we believe that listed companies can increase their base of individual shareholders by lowering the minimum investment unit and reinstating shareholder benefit programs.</li>
<li>The increase in the number of listed companies actually implementing stock splits to lower their minimum trading units was triggered by a “request from the Tokyo Stock Exchange” in 2023.</li>
<li>Companies that understand well present measures to increase individual shareholders as a response to TSE’s request to boost stock prices, but their actual goal is to secure the poxy voting.</li>
</ul>


As the influence of foreign investors grows, we believe that listed companies can increase their base of individual shareholders by lowering the minimum investment unit and reinstating shareholder benefit programs.
The increase in the number of listed companies actually implementing stock splits to lower their minimum trading units was triggered by a “request from the Tokyo Stock Exchange” in 2023.
Companies that understand well present measures to increase individual shareholders as a response to TSE’s request to boost stock prices, but their actual goal is to secure the poxy voting.


Is the Real Purpose Behind the Increasing Number of Stock Splits to Secure Proxy Voting?

<ul>
<li>Similar to last year, the percentage of companies holding AGM over four days—the last Tuesday, Wednesday, Thursday, and Friday of June—rose from 79.9% last year to 81.0%, marking further increase.</li>
<li>Currently, few companies disclose annual securities reports three weeks prior to AGM; all documents should be translated into English in notices of meeting, but only 30% of companies do so.</li>
<li>An increasing number of companies are holding AGMs that allow only in-person attendance. The number of AGMs that permit online questions and voting has not increased.</li>
</ul>


Similar to last year, the percentage of companies holding AGM over four days—the last Tuesday, Wednesday, Thursday, and Friday of June—rose from 79.9% last year to 81.0%, marking further increase.
Currently, few companies disclose annual securities reports three weeks prior to AGM; all documents should be translated into English in notices of meeting, but only 30% of companies do so.
An increasing number of companies are holding AGMs that allow only in-person attendance. The number of AGMs that permit online questions and voting has not increased.


Is the Formalization of Disclosures Regarding AGMs Underway?

<ul>
<li>Amid the current heated debate over using cash for growth investments, discussions seem to be moving towards forcing companies to use cash, even if accounting standards had to be changed.</li>
<li>The current challenge facing Japanese companies is that their growth potential and return on capital fall short of expectations. Changing accounting standards will not solve these issues.</li>
<li>If TSE were to unify its accounting standards with IFRS, that wouldn’t necessarily be a bad idea. However, growth and profitability cannot be masked by changes to accounting standards.</li>
</ul>


Amid the current heated debate over using cash for growth investments, discussions seem to be moving towards forcing companies to use cash, even if accounting standards had to be changed.
The current challenge facing Japanese companies is that their growth potential and return on capital fall short of expectations. Changing accounting standards will not solve these issues.
If TSE were to unify its accounting standards with IFRS, that wouldn’t necessarily be a bad idea. However, growth and profitability cannot be masked by changes to accounting standards.


Can Japanese Companies Recover What They’ve Lost over 40 Years? Accounting Standard Revision Debate

<ul>
<li>Over the years, the independent director system may have become overly formalistic and “evolved” into a Japanese-style system that differs from what was originally intended.</li>
<li>The question is whether serving as a director for an extended period is truly in the best interests of shareholders. After all, no one can remain a director forever.</li>
<li>The fact that the length of directors’ tenures is being called into question is likely a sign that succession planning and director nomination process aren’t functioning properly at many companies.</li>
</ul>


Over the years, the independent director system may have become overly formalistic and “evolved” into a Japanese-style system that differs from what was originally intended.
The question is whether serving as a director for an extended period is truly in the best interests of shareholders. After all, no one can remain a director forever.
The fact that the length of directors’ tenures is being called into question is likely a sign that succession planning and director nomination process aren’t functioning properly at many companies.


The Problem of the Effectiveness of Independent Directors: A History of the “Evolution” of Formalism

<ul>
<li>Even among TSE Standard Market companies, there are those with high capital profitability. As institutional investors become aware of them, these companies become investment targets and their market capitalization grows.</li>
<li>Given that companies unable to meet the listing maintenance criteria for Prime and Growth Market are moving to Standard Market, ensuring the quality of Standard Market remains a challenge.</li>
<li>Improvements in the quality of Standard Market are likely to be achieved more through delisting than through disclosure requirements. Cases requesting the dissolution of parent-subsidiary listings and MBOs will increase.</li>
</ul>


Even among TSE Standard Market companies, there are those with high capital profitability. As institutional investors become aware of them, these companies become investment targets and their market capitalization grows.
Given that companies unable to meet the listing maintenance criteria for Prime and Growth Market are moving to Standard Market, ensuring the quality of Standard Market remains a challenge.
Improvements in the quality of Standard Market are likely to be achieved more through delisting than through disclosure requirements. Cases requesting the dissolution of parent-subsidiary listings and MBOs will increase.


Standard Markets Would Attract More Attention from Investors Without Trading Liquidity Issues

Executive Director, Co-head of CG Research, Metrical Inc.
METRICAL INC. is a corporate governance(CG)research, investment research and consulting firm in Japan, offering a full service CG research and solutions to investors, public companies and other wide range of organizations globally. http://www.metrical.co.jp/

Aki Matsumoto
Executive Director
• Metrical Inc

Is the Real Purpose Behind the Increasing Number of Stock Splits to Secure Proxy Voting?

I would like to discuss the May 6 Nikkei article titled “Lower Barriers to Stock Investment: Minimum Investment Amounts and Stock Splits Bring...

Metrical Inc

Is the Formalization of Disclosures Regarding AGMs Underway?

I would like to discuss the document published by TSE “Trends in Annual General Meetings of Shareholders for Companies Reporting Financial Results...

Metrical Inc

Can Japanese Companies Recover What They’ve Lost over 40 Years? Accounting Standard Revision Debate

I would like to discuss the issues on the April 25 Nikkei article titled “Debate on ‘Goodwill’ Accounting Must Face Reality: Make IFRS a...

Metrical Inc

The Problem of the Effectiveness of Independent Directors: A History of the “Evolution” of Formalism

I would like to discuss the April 24 Nikkei article titled “Investors Take a Hard Line on Long-Serving Outside Directors: Approval Rates Drop at...

Metrical Inc

Standard Markets Would Attract More Attention from Investors Without Trading Liquidity Issues

I would like to discuss the issues on the Nikkei Shimbun article published on April 24 “The Bountiful TSE Standard Market.”

Metrical Inc