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>In 2023, % Woman Board Members increased progressively even in companies with lower corporate governance scores. Many companies are unanimous in their commitment to appointing women board members.</li>
<li>Together with the fact that business challenges have not been solved by only having people who think alike, 90% of institutional investors said that information on women's activities is important.</li>
<li>Companies with over 25% women on their boards have superior values in profitability and stock valuation. Managers should implement the promotion of women in order to transition to value-creating management.</li>
</ul>


In 2023, % Woman Board Members increased progressively even in companies with lower corporate governance scores. Many companies are unanimous in their commitment to appointing women board members.
Together with the fact that business challenges have not been solved by only having people who think alike, 90% of institutional investors said that information on women's activities is important.
Companies with over 25% women on their boards have superior values in profitability and stock valuation. Managers should implement the promotion of women in order to transition to value-creating management.


Investors Want to See a Shift in Management to Create Value, Not Just Meet Government Target Numbers

<ul>
<li>There was modest improvements in corporate governance in 2023, without any Code revisions. About two thirds of companies showed little improvement in their corporate governance practices over the past year.</li>
<li>However, the increase in % Woman Board Members, a touchstone for measuring the improvement attitude of some companies that have shown improvement, gives us hope for the future.</li>
<li>Companies with Metrical CG scores rising below 2.5 points and those with declines have challenges with their use of cash, along with their stock repurchase and dividend policies.</li>
</ul>


There was modest improvements in corporate governance in 2023, without any Code revisions. About two thirds of companies showed little improvement in their corporate governance practices over the past year.
However, the increase in % Woman Board Members, a touchstone for measuring the improvement attitude of some companies that have shown improvement, gives us hope for the future.
Companies with Metrical CG scores rising below 2.5 points and those with declines have challenges with their use of cash, along with their stock repurchase and dividend policies.


Governance Improvement in 2023 Was Modest but Saved by a Rise in % Woman Board Members

<ul>
<li>Over the past year, Tobin's Q increased slightly for listed companies as a whole; companies that increased their ROE and ROA increased their Tobin's Q. vice versa.</li>
<li>Companies that originally had high stock valuations and high ROE and ROA increased their valuations by becoming more profitable. Raising ROE and ROA is the key to higher valuations.</li>
<li>For companies with low valuations, it wasn't easy to raise ROE and ROA solely at TSE's request. Some of companies whose stock valuations have fallen will go private through MBOs.</li>
</ul>


Over the past year, Tobin's Q increased slightly for listed companies as a whole; companies that increased their ROE and ROA increased their Tobin's Q. vice versa.
Companies that originally had high stock valuations and high ROE and ROA increased their valuations by becoming more profitable. Raising ROE and ROA is the key to higher valuations.
For companies with low valuations, it wasn't easy to raise ROE and ROA solely at TSE's request. Some of companies whose stock valuations have fallen will go private through MBOs.


Higher ROE & ROA Are Keys to Higher Valuation, but This Wasn't Easy for Companies with Low Valuation

<ul>
<li>% of independent directors continued a modest rise, and % of women board members still reached 10% level. 6 of 1,788 companies transitioned to Company with US type 3 Committees.</li>
<li>Growth Policy score improved as more companies included ROIC in their KPIs, and AGM Disclosures score improved as the majority of prime market listed companies joined the voting platform.</li>
<li>Scores related to the use of cash and IR Disclosures score also didn’t improve noticeably. Companies are not taking action on how to use cash to expand their corporate value.</li>
</ul>


% of independent directors continued a modest rise, and % of women board members still reached 10% level. 6 of 1,788 companies transitioned to Company with US type 3 Committees.
Growth Policy score improved as more companies included ROIC in their KPIs, and AGM Disclosures score improved as the majority of prime market listed companies joined the voting platform.
Scores related to the use of cash and IR Disclosures score also didn’t improve noticeably. Companies are not taking action on how to use cash to expand their corporate value.


Corporate Governance in Japan Is Improving, but Has yet to Take Steps to Create Value

<ul>
<li>With ISS's plan to resume ROE criteria and TSE's mention of P/B, more shareholder proposals calling for stronger shareholder returns due to stagnant stock prices and ROEs can be expected.</li>
<li>Since over 30% of listed companies have major shareholders holding 20% or more of their interests, the voting behavior of domestic institutions is key to the passage of shareholder proposals.</li>
<li>With TSE's disclosure request regarding the significance of parent-subsidiary listings, this matter will become another focus of the AGM in business portfolio reform and securing the interests of minority shareholders.</li>
</ul>


With ISS's plan to resume ROE criteria and TSE's mention of P/B, more shareholder proposals calling for stronger shareholder returns due to stagnant stock prices and ROEs can be expected.
Since over 30% of listed companies have major shareholders holding 20% or more of their interests, the voting behavior of domestic institutions is key to the passage of shareholder proposals.
With TSE's disclosure request regarding the significance of parent-subsidiary listings, this matter will become another focus of the AGM in business portfolio reform and securing the interests of minority shareholders.


Shareholder Proposals Likely a Focus at 2024 AGM Are ROE, P/B, and Parent-Subsidiary Listings

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)

Investors Want to See a Shift in Management to Create Value, Not Just Meet Government Target Numbers

I would like to discuss the issues on the December 25 Nikkei Shimbun article, "Prime Minister Declares Female Board Members of Prime Market Listed...

Metrical Inc

Governance Improvement in 2023 Was Modest but Saved by a Rise in % Woman Board Members

I would like to discuss the issues on what companies have improved their corporate governance practices in the year 2023.

Metrical Inc

Higher ROE & ROA Are Keys to Higher Valuation, but This Wasn't Easy for Companies with Low Valuation

I would like to discuss the issues on what companies have increased their stock valuations over the year 2023 by examining Metrical Universe 1,755...

Metrical Inc

Corporate Governance in Japan Is Improving, but Has yet to Take Steps to Create Value

I would like to discuss how much progress has been made in corporate governance initiatives by listed companies during the year 2023.

Metrical Inc

Shareholder Proposals Likely a Focus at 2024 AGM Are ROE, P/B, and Parent-Subsidiary Listings

I would like to discuss the issues on the December 27 Nikkei article, "Shareholder Proposals, 344 in the Highest Number in 2023, Activist Investors...

Metrical Inc