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>The number of companies participating in electronic-voting platform increased, but most of them are prime market companies. This is because "participation in electronic-voting platform" was included in the listing criteria.</li>
<li>According to a survey conducted by METI, there are issues that are not user-friendly, such as the need to resolve the issue of "procedural duplication" when voting electronically.</li>
<li>This issue isn't a matter of an electronic-platform, but requires change in the overall institutional design for electronic shareholder meetings, together with the computerization and online-accessibility of documents for AGMs,.</li>
</ul>


The number of companies participating in electronic-voting platform increased, but most of them are prime market companies. This is because "participation in electronic-voting platform" was included in the listing criteria.
According to a survey conducted by METI, there are issues that are not user-friendly, such as the need to resolve the issue of "procedural duplication" when voting electronically.
This issue isn't a matter of an electronic-platform, but requires change in the overall institutional design for electronic shareholder meetings, together with the computerization and online-accessibility of documents for AGMs,.


Japan's Governance: About an Article on the Introduction of Electronic Voting for the AGMs

<ul>
<li>Since all 9 companies have low foreign shareholding ratios due to the presence of large shareholders, a shortcut to increasing stock price performance is to increase the foreign shareholding ratio.</li>
<li>Unless it's feasible to reduce stake of major shareholders, the key will be to raise ROA, which is correlated with valuations, so growth policy and capital allocation must be clarified.</li>
<li>For long-term investors, continued increase in the % independent directors is also helpful. The stock performance of these companies will likely vary in the future depending on the measures taken.</li>
</ul>


Since all 9 companies have low foreign shareholding ratios due to the presence of large shareholders, a shortcut to increasing stock price performance is to increase the foreign shareholding ratio.
Unless it's feasible to reduce stake of major shareholders, the key will be to raise ROA, which is correlated with valuations, so growth policy and capital allocation must be clarified.
For long-term investors, continued increase in the % independent directors is also helpful. The stock performance of these companies will likely vary in the future depending on the measures taken.


Japan's Governance: About an Article on Companies to Which Transitional Measures Are Applied

<ul>
<li>Although the dates of AGMs are gradually becoming more spread out, the number of companies holding their AGMs on the top concentrated 3 days account for 64.7%.</li>
<li>Early online disclosure of convocation notices is progressing, but sending them out up to 3 weeks in advance has not progressed very well.</li>
<li>The use of electronic voting platforms is progressing among listed companies in the prime market, where this matter is included in the listing criteria.</li>
</ul>


Although the dates of AGMs are gradually becoming more spread out, the number of companies holding their AGMs on the top concentrated 3 days account for 64.7%.
Early online disclosure of convocation notices is progressing, but sending them out up to 3 weeks in advance has not progressed very well.
The use of electronic voting platforms is progressing among listed companies in the prime market, where this matter is included in the listing criteria.


Japan's Governance: Trends in AGMs of Companies with Fiscal Years Ending in March

<ul>
<li>In Japanese companies, where the overwhelming majority of directors are internal executive directors, independent directors who are in the minority tend to be referred to as outside directors.</li>
<li>There are concerns about whether a company's board that doesn’t embrace diverse values can sustain growth, and whether there is risk that growth will be hampered by lack of diversity.</li>
<li>The tendency of companies to hire friends as outside directors and to require them to play role in endorsing the executive's-management shows an aspect of reluctance to embrace diverse values.</li>
</ul>


In Japanese companies, where the overwhelming majority of directors are internal executive directors, independent directors who are in the minority tend to be referred to as outside directors.
There are concerns about whether a company's board that doesn’t embrace diverse values can sustain growth, and whether there is risk that growth will be hampered by lack of diversity.
The tendency of companies to hire friends as outside directors and to require them to play role in endorsing the executive's-management shows an aspect of reluctance to embrace diverse values.


Japan's Governance: About the Article on Outside Directors (2)

<ul>
<li>Nikkei article of March 18 titled "Prime Market Listed Companies Reel in ESG, Increase Value with 'Non-Financial.'" I considered the issues in the article in reference to my previous article.</li>
<li>The prime market has limited investment targets because their market caps are mostly smaller for institutions, and their profitability needs further improvement, and valuations remain low in line with this.</li>
<li>It’s reasonable to consider the portion of market-cap exceeding net assets as "goodwill,"  source of earning power and growth potential that has a more direct impact on future cash flows.</li>
</ul>


Nikkei article of March 18 titled "Prime Market Listed Companies Reel in ESG, Increase Value with 'Non-Financial.'" I considered the issues in the article in reference to my previous article.
The prime market has limited investment targets because their market caps are mostly smaller for institutions, and their profitability needs further improvement, and valuations remain low in line with this.
It’s reasonable to consider the portion of market-cap exceeding net assets as "goodwill,"  source of earning power and growth potential that has a more direct impact on future cash flows.


Japan's Governance: About an Article on Prime Market Listed Companies

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: About an Article on the Introduction of Electronic Voting for the AGMs

Nikkei published an article titled "e-Voting for General Meetings Increases 40%; Prime Market Listed Companies Progressing in Response." This...

Metrical Inc

Japan's Governance: About an Article on Companies to Which Transitional Measures Are Applied

I considered the issue of Nikkei article regarding "the lackluster stock price performance of companies whose tradable share ratio does not meet...

Metrical Inc

Japan's Governance: Trends in AGMs of Companies with Fiscal Years Ending in March

TSE disclosed on April 25 a document titled "Trends in AGMs of Companies with Fiscal Year-End March 31, 2022," and I would like to discuss the...

Metrical Inc

Japan's Governance: About the Article on Outside Directors (2)

the Nikkei Shimbun on February 28 published an article titled "Is 'Objectivity' Necessary for Outside Directors?" and I have considered the issues.

Metrical Inc

Japan's Governance: About an Article on Prime Market Listed Companies

Nikkei article of March 18 titled "Prime Market Listed Companies Reel in ESG, Increase Value with 'Non-Financial.'" I would like to discuss the...

Metrical Inc