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>23 companies that have not been confirmed to have proposed anti-takeover measures at AGM since 2014, but have anti-takeover, include companies with high P/B, but not superior ROE and ROA.</li>
<li>The market capitalization of the 271 companies that have takeover defense measures shows that many of them are relatively small companies.</li>
<li>The stock price performance of the 271 companies that still have takeover defenses has underperformed their respective stock indices, which means that their market capitalization has not expanded.</li>
</ul>


23 companies that have not been confirmed to have proposed anti-takeover measures at AGM since 2014, but have anti-takeover, include companies with high P/B, but not superior ROE and ROA.
The market capitalization of the 271 companies that have takeover defense measures shows that many of them are relatively small companies.
The stock price performance of the 271 companies that still have takeover defenses has underperformed their respective stock indices, which means that their market capitalization has not expanded.


Japan's Governance: What Kind of Firm Adopts Takeover Defenses? What Is the Stock Price Performance?

<ul>
<li>Of the companies that have proposed anti-takeover measures on their shareholder agenda since 2014, 42% have withdrawn their anti-takeover measures.</li>
<li>There is clear difference in performance between companies that still have anti-takeover measures and those that have dropped the measures, and there is also clear difference in corporate governance practices</li>
<li>The market capitalization of companies that still have anti-takeover provisions is small. This would relate to combination of factors such as lack of robust growth strategy and communications to investors.</li>
</ul>


Of the companies that have proposed anti-takeover measures on their shareholder agenda since 2014, 42% have withdrawn their anti-takeover measures.
There is clear difference in performance between companies that still have anti-takeover measures and those that have dropped the measures, and there is also clear difference in corporate governance practices
The market capitalization of companies that still have anti-takeover provisions is small. This would relate to combination of factors such as lack of robust growth strategy and communications to investors.


Japan's Governance: Takeover Defense Update

<ul>
<li>The "lead independent outside director" is one of the most overlooked items in the Corporate Governance Code.</li>
<li>While few companies have lead independent outside director, many companies are compliant with the Code because they are able to "establish a system for collaboration" and therefore have no problems.</li>
<li>In the Code, lead independent outside director isn't specifically listed as the person who will be involved in dialogue with shareholders, but auditors are added in addition to outside directors.</li>
</ul>


The "lead independent outside director" is one of the most overlooked items in the Corporate Governance Code.
While few companies have lead independent outside director, many companies are compliant with the Code because they are able to "establish a system for collaboration" and therefore have no problems.
In the Code, lead independent outside director isn't specifically listed as the person who will be involved in dialogue with shareholders, but auditors are added in addition to outside directors.


Japan's Governance: Revised Corporate Governance Code: Overlooked "Lead Independent Director"

<ul>
<li>The revised Corporate Governance Code, which accompanied the TSE's market reclassification, includes changes aimed at further clarifying the role of the Nomination and Compensation Committees.</li>
<li>Throughout the examination here, it appears that, so far, companies that have implemented higher practices in committees have not performed noticeably better than other groups on a relative basis.</li>
<li>The fact that the stock price isn't highly valued compared to other groups may mean that investors don't value the committee factor much or are skeptical it functions effectively enough.</li>
</ul>


The revised Corporate Governance Code, which accompanied the TSE's market reclassification, includes changes aimed at further clarifying the role of the Nomination and Compensation Committees.
Throughout the examination here, it appears that, so far, companies that have implemented higher practices in committees have not performed noticeably better than other groups on a relative basis.
The fact that the stock price isn't highly valued compared to other groups may mean that investors don't value the committee factor much or are skeptical it functions effectively enough.


Japan's Governance: TSE Prime Market Listing Standards and Establishment of Nom. And Comp. Committee

<ul>
<li>Companies are now required to set concept and measurable targets for diversity in management positions (appointment of women, foreigners, and mid-career hires) and disclose them, but they are voluntary targets.</li>
<li>Number of companies in Metrical Universe by number of female directors shows 28.9% companies have no female directors, 42.5% have 1 female director, and only 28.6% have 2 or more.</li>
<li>Problem of delay in appointing women and foreigners to managers lies in the fact that few companies employ diversity management to incorporate benefits of sharing diverse values into the management.</li>
</ul>


Companies are now required to set concept and measurable targets for diversity in management positions (appointment of women, foreigners, and mid-career hires) and disclose them, but they are voluntary targets.
Number of companies in Metrical Universe by number of female directors shows 28.9% companies have no female directors, 42.5% have 1 female director, and only 28.6% have 2 or more.
Problem of delay in appointing women and foreigners to managers lies in the fact that few companies employ diversity management to incorporate benefits of sharing diverse values into the management.


Japan's Governance: Revised Corporate Governance Code: Ensuring Diversity in Core Human Resources

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)

Japan's Governance: What Kind of Firm Adopts Takeover Defenses? What Is the Stock Price Performance?

I have hypothesized companies that still had anti-takeover provisions would have modest pace of market cap expansion. This stock performance...

Metrical Inc

Japan's Governance: Takeover Defense Update

This analysis shows the poor performance of companies that still have anti-takeover provisions and the small market capitalization of such...

Metrical Inc

Japan's Governance: Revised Corporate Governance Code: Overlooked "Lead Independent Director"

Lead independent outside director is one of the most overlooked items in the Corporate Governance Code. This revision didn't specifically require...

Metrical Inc

Japan's Governance: TSE Prime Market Listing Standards and Establishment of Nom. And Comp. Committee

The revised Corporate Governance Code, which accompanied the TSE's market reclassification, includes changes aimed at further clarifying the role...

Metrical Inc

Japan's Governance: Revised Corporate Governance Code: Ensuring Diversity in Core Human Resources

This article will focus on "Ensuring diversity in the company's core human resources," which was added as supplementary principle 2-4(1) to the...

Metrical Inc