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.

As you know, the Boards of Directors of most listed companies in Japan are dominated by internal directors, and when the Corporate Governance Code was launched in 2015, it was expected to improve the governance of Japanese companies by appointing independent outside directors, which was extremely rare at the time. It was hoped that independent directors with diverse backgrounds from outside the company would bring a breath of fresh air to the board, which tended to prioritize the internal hierarchy, and that this would lead to more active and transparent discussions at board meetings. There are a number of issues related to independent outside directors, but this time I would like to consider the background of independent outside directors.

As you know, the Boards of Directors of most listed companies in Japan are dominated by internal directors, and when the Corporate Governance Code was launched in 2015, it was expected to improve the governance of Japanese companies by appointing independent outside directors, which was extremely rare at the time. It was hoped that independent directors with diverse backgrounds from outside the company would bring a breath of fresh air to the board, which tended to prioritize the internal hierarchy, and that this would lead to more active and transparent discussions at board meetings. There are a number of issues related to independent outside directors, but this time I would like to consider the background of independent outside directors.

Japan's Governance: Background of Independent Outside Directors

Metrical uses a variety of evaluation criteria to score the corporate governance of listed companies. One of the evaluation criteria is the disclosure factor regarding disclosure of information on annual shareholders meetings and investor relations. It is important to know whether a listed company is actively communicating information to its shareholders and investors, and whether its disclosure efforts are moving in the right direction. It makes a huge difference for shareholders and investors to make investment decisions if the company does not disclose information in a positive manner. This is because the disclosure of information that can be used to make decisions about the risk-return of a company's business and the location of its management risks can help reduce investment risks. It has also been confirmed that the AGM and IR disclosure scores (AGM/IR scores) are statistically correlated with ROA (actual performance) and Tobin's Q.

Metrical uses a variety of evaluation criteria to score the corporate governance of listed companies. One of the evaluation criteria is the disclosure factor regarding disclosure of information on annual shareholders meetings and investor relations. It is important to know whether a listed company is actively communicating information to its shareholders and investors, and whether its disclosure efforts are moving in the right direction. It makes a huge difference for shareholders and investors to make investment decisions if the company does not disclose information in a positive manner. This is because the disclosure of information that can be used to make decisions about the risk-return of a company's business and the location of its management risks can help reduce investment risks. It has also been confirmed that the AGM and IR disclosure scores (AGM/IR scores) are statistically correlated with ROA (actual performance) and Tobin's Q.

Japan's Governance: Disclosure Factor for Annual General Shareholders Meeting and Investor Relations

In recent years, more and more companies have begun to provide and disclose notices of general meetings of shareholders in English. In addition, an increasing number of companies are allowing electromagnetic voting, although this requires changes to the company's articles of incorporation. These are very good initiatives for shareholders and investors. On the other hand, the number of companies submitting their corporate governance reports to the Tokyo Stock Exchange in English is still limited. As of June 2021, only 306 of the 3,752 listed companies have submitted their corporate governance reports in English. The chart below shows the number of companies that have filed their corporate governance reports in English on a monthly basis since May 2018. You can see from the bar chart that the number has increased at a very moderate pace.

In recent years, more and more companies have begun to provide and disclose notices of general meetings of shareholders in English. In addition, an increasing number of companies are allowing electromagnetic voting, although this requires changes to the company's articles of incorporation. These are very good initiatives for shareholders and investors. On the other hand, the number of companies submitting their corporate governance reports to the Tokyo Stock Exchange in English is still limited. As of June 2021, only 306 of the 3,752 listed companies have submitted their corporate governance reports in English. The chart below shows the number of companies that have filed their corporate governance reports in English on a monthly basis since May 2018. You can see from the bar chart that the number has increased at a very moderate pace.

Japan's Governance: Disclosure of Corporate Governance Report in English

In my previous article, "Human Rights Policy," I discussed the fact that the management of TamaHome (1419) has acted and behaved in a manner that is inconsistent with respect for human rights and is not in line with the "Human Rights Policy" posted on the company's website. It is not uncommon for Japanese companies to put too much emphasis on formalities and not enough on actual actions. I often see allegations of copy and paste in the corporate governance reports that the Tokyo Stock Exchange requires listed companies to submit.

In my previous article, "Human Rights Policy," I discussed the fact that the management of TamaHome (1419) has acted and behaved in a manner that is inconsistent with respect for human rights and is not in line with the "Human Rights Policy" posted on the company's website. It is not uncommon for Japanese companies to put too much emphasis on formalities and not enough on actual actions. I often see allegations of copy and paste in the corporate governance reports that the Tokyo Stock Exchange requires listed companies to submit.

Japan's Governance: The Problem of Copy and Paste Allegations

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Will Semiconductor   Shan / Technical Analysis

New developments suggest caution is warranted, and leads us to believe the mixed market environment is poised to continue. The new and concerning developments include widening high yield spreads in the U.S. and Europe and improving relative strength for defensive Sectors -- both are clear signs of risk aversion. At the same time, global indexes remain above critical support levels; until this changes our neutral outlook remains appropriate.

New developments suggest caution is warranted, and leads us to believe the mixed market environment is poised to continue. The new and concerning developments include widening high yield spreads in the U.S. and Europe and improving relative strength for defensive Sectors -- both are clear signs of risk aversion. At the same time, global indexes remain above critical support levels; until this changes our neutral outlook remains appropriate.

Global Equity Strategy: Reason For Caution; Actionable Themes: Services/Technology & Staples

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: Background of Independent Outside Directors

One of the reasons of the characteristic of having a large number of lawyers and accountants as independent directors in Japan would be related to...

Metrical Inc

Japan's Governance: Disclosure Factor for Annual General Shareholders Meeting and Investor Relations

It is important to know whether a listed company is actively communicating information to its shareholders and investors, and whether its...

Metrical Inc

Japan's Governance: Disclosure of Corporate Governance Report in English

Only 8% of companies disclose the corporate governance reports in English. Foreign investors, who trade more than 70% of TSE, can enhance...

Metrical Inc

Japan's Governance: The Problem of Copy and Paste Allegations

It is not uncommon for Japanese companies to put too much emphasis on formalities and not enough on actual actions. I often see allegations of copy...

Metrical Inc

Global Equity Strategy: Reason For Caution; Actionable Themes: Services/Technology & Staples

With interest rates expected to move sideways to lower, we recommend a mix of growth and defensive Sectors. Today we focus on Services/Technology...

Vermilion Research