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>It is very difficult to ensure the independence and transparency of a committee when the board of directors is staffed with people who are aligned with the president's wishes.</li>
<li>Companies with high ROE have superior corporate governance, due to effective overseas investor's engagement, while companies with low ROE show unclear policies for improving ROE, despite having formalized board practice.</li>
<li>To improve the effectiveness of the board, companies should appoint people to the board who will help expand the value of the company, and use engagement with overseas investors etc.</li>
</ul>


It is very difficult to ensure the independence and transparency of a committee when the board of directors is staffed with people who are aligned with the president's wishes.
Companies with high ROE have superior corporate governance, due to effective overseas investor's engagement, while companies with low ROE show unclear policies for improving ROE, despite having formalized board practice.
To improve the effectiveness of the board, companies should appoint people to the board who will help expand the value of the company, and use engagement with overseas investors etc.


To Expand Value and Improve Capital Profitability, the Promotion of Human Resources Is Necessary

<ul>
<li>The high percentage of foreign ownership is a characteristic of companies that have improved capital profitability and increased valuations, which is effective for overseas investor engagement.</li>
<li>If the system is revised to help collaborative engagement and the identification of substantial shareholders, some of the challenges will be eliminated for both investors and the company.</li>
<li>To make the engagement more effective, investors should increase active funds and companies should decrease cross-shareholdings.</li>
</ul>


The high percentage of foreign ownership is a characteristic of companies that have improved capital profitability and increased valuations, which is effective for overseas investor engagement.
If the system is revised to help collaborative engagement and the identification of substantial shareholders, some of the challenges will be eliminated for both investors and the company.
To make the engagement more effective, investors should increase active funds and companies should decrease cross-shareholdings.


What Investors and Companies Should Do to Make Engagement More Effective ....

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

TSE Tokyo Price Index TOPIX / Event-Driven

<ul>
<li>The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.</li>
<li>The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.</li>
<li>If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That's MUCH tougher.</li>
</ul>


The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That's MUCH tougher.


New Year New NISA Accounts - It's BIG, But Not so Big

<ul>
<li>We need to watch carefully to see whether cash flow will subsequently increase in the projects that the CB issuers have invested their proceeds in.</li>
<li>Share prices of companies that announce equity financings, including CBs, usually decline. Besides the dilution, another aspect is the effect of the company's announcement of the sale of its shares.</li>
<li>In the case of CBs, the company should keep in mind that it sold the conversion rights of its shares for less than their actual call option value.</li>
</ul>


We need to watch carefully to see whether cash flow will subsequently increase in the projects that the CB issuers have invested their proceeds in.
Share prices of companies that announce equity financings, including CBs, usually decline. Besides the dilution, another aspect is the effect of the company's announcement of the sale of its shares.
In the case of CBs, the company should keep in mind that it sold the conversion rights of its shares for less than their actual call option value.


Although the Cost of Capital for CBs Should Be Considered Much Higher than for SBs

<ul>
<li>Few companies file their annual securities reports prior to AGM, and since they are filed 1-2 days prior to AGM, there's insufficient time for a thorough review of useful information.</li>
<li>Profitable companies that gain the support of overseas investors further increase their return on capital through engagement, and the gap between them and those that don't will continue to widen.</li>
<li>Since reducing policy shareholdings will reduce the percentage of voting rights that unconditionally favor company proposals, engagement will be more effective and speed up the process of management improvement.</li>
</ul>


Few companies file their annual securities reports prior to AGM, and since they are filed 1-2 days prior to AGM, there's insufficient time for a thorough review of useful information.
Profitable companies that gain the support of overseas investors further increase their return on capital through engagement, and the gap between them and those that don't will continue to widen.
Since reducing policy shareholdings will reduce the percentage of voting rights that unconditionally favor company proposals, engagement will be more effective and speed up the process of management improvement.


What Is Needed for More Engagement to Be Effective Is to Reduce Policy Shareholdings

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)

To Expand Value and Improve Capital Profitability, the Promotion of Human Resources Is Necessary

I would like to discuss the overview of " Improving the Effectiveness of the Board" in the "Action Program 2024 for Implementing Corporate...

Metrical Inc

What Investors and Companies Should Do to Make Engagement More Effective ....

I would like to discuss the overview of "Substantiation of Stewardship Activities" in the "Action Program 2024 for Implementing Corporate...

Metrical Inc

New Year New NISA Accounts - It's BIG, But Not so Big

We will get data shortly showing the January effect of NISA account openings and fundings. So far, the data we can get on a more timely basis...

Travis Lundy

Although the Cost of Capital for CBs Should Be Considered Much Higher than for SBs

I would like to discuss the issues on the June 12 Nikkei article, "Growth Investment Swells as Stock Market Rises; Convertible Bond Issuances...

Metrical Inc

What Is Needed for More Engagement to Be Effective Is to Reduce Policy Shareholdings

I would like to discuss the issues on the June 11 Nikkei Shimbun article, "Shareholders' Meeting, Heated Debate with Shareholders on Shareholder...

Metrical Inc