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>Given that embedding diversity within company is essential for the company's growth and resilience, it’ll be up to management leadership to decide whether this should be promoted as management strategy.</li>
<li>Companies with more women in the workforce tend to have higher stock prices. It can be assumed that the company is hiring talented, skilled, and necessary personnel regardless of gender.</li>
<li>Analysis shows that companies with a higher percentage of female board members contribute more to value creation. Companies that promote board diversity are also keen on diversity throughout the company.</li>
</ul>


Given that embedding diversity within company is essential for the company's growth and resilience, it’ll be up to management leadership to decide whether this should be promoted as management strategy.
Companies with more women in the workforce tend to have higher stock prices. It can be assumed that the company is hiring talented, skilled, and necessary personnel regardless of gender.
Analysis shows that companies with a higher percentage of female board members contribute more to value creation. Companies that promote board diversity are also keen on diversity throughout the company.


Whether or Not to Promote Diversity in the Company Depends on Management Leadership

<ul>
<li>With few women in managerial positions, the reality is that for the time being female directors are forced to appoint candidates from outside the company.</li>
<li>Two companies is the limit for a monthly board meeting with agenda preliminarily reviewed; investors should oppose proposals to elect candidates who hold board positions at three or more companies.</li>
<li>The main idea is to promote board diversity for making strategic decisions based on diverse values, but it has become a numbers matching exercise to achieve % of female board members.</li>
</ul>


With few women in managerial positions, the reality is that for the time being female directors are forced to appoint candidates from outside the company.
Two companies is the limit for a monthly board meeting with agenda preliminarily reviewed; investors should oppose proposals to elect candidates who hold board positions at three or more companies.
The main idea is to promote board diversity for making strategic decisions based on diverse values, but it has become a numbers matching exercise to achieve % of female board members.


Board Diversity Also Confuses Ends with Means

<ul>
<li>The Kankeiren intends to prevent further increases in the ratio of independent directors because of the small number of candidates for outside directors.</li>
<li>One reason why the substance of the Corporate Governance Code has not improved is that independent directors are a minority on the board.</li>
<li>The company is also responsible for not developing female internal executive director candidates, relying on outside directors for female directors, and not appointing foreign talent to the board.</li>
</ul>


The Kankeiren intends to prevent further increases in the ratio of independent directors because of the small number of candidates for outside directors.
One reason why the substance of the Corporate Governance Code has not improved is that independent directors are a minority on the board.
The company is also responsible for not developing female internal executive director candidates, relying on outside directors for female directors, and not appointing foreign talent to the board.


Manager's Real Intent to Prevent Further Increase in Ratio of Independent Directors Is Revealed

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<li>Japan has the largest number of TCFD endorsing institutions in the world, and the number of listed companies endorsing the TCFD has increased by 350 since last year.</li>
<li>It's hoped that more companies will follow the example of those that disclosed specific climate change impact estimates under certain conditions, and that other companies will attempt to do so.</li>
<li>There are many companies that have endorsed TCFD, but have only endorsed it and not disclosed it, so the issue isn’t about endorsing TCFD, but about the content of disclosure.</li>
</ul>


Japan has the largest number of TCFD endorsing institutions in the world, and the number of listed companies endorsing the TCFD has increased by 350 since last year.
It's hoped that more companies will follow the example of those that disclosed specific climate change impact estimates under certain conditions, and that other companies will attempt to do so.
There are many companies that have endorsed TCFD, but have only endorsed it and not disclosed it, so the issue isn’t about endorsing TCFD, but about the content of disclosure.


Issues with Content of Disclosures, Not Keyword Searches in TCFD

<ul>
<li>TSE market reorganization triggered the reduction of policy shareholdings, and now the test will be whether policy shareholdings can be reduced in order to raise ROE, which is sluggishly growing.</li>
<li>Companies that maintain excessive policy shareholdings should provide a rational explanation of their holding policies and the reasons for each shareholding in their corporate governance reports and annual securities reports.</li>
<li>Improving OP Margin, which is highly correlated with ROE, is a shortcut to raising ROE. Policy shareholdings, should not be accumulated in cash on hand, but used for profitable investments.</li>
</ul>


TSE market reorganization triggered the reduction of policy shareholdings, and now the test will be whether policy shareholdings can be reduced in order to raise ROE, which is sluggishly growing.
Companies that maintain excessive policy shareholdings should provide a rational explanation of their holding policies and the reasons for each shareholding in their corporate governance reports and annual securities reports.
Improving OP Margin, which is highly correlated with ROE, is a shortcut to raising ROE. Policy shareholdings, should not be accumulated in cash on hand, but used for profitable investments.


Policy Shareholdings, if Reduced, Should Be Used for Profitable Investments

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)

Whether or Not to Promote Diversity in the Company Depends on Management Leadership

I would like to discuss the issues on the September 18 Nikkei article, "Human Capital Disclosure, Hints for Investment, and Correlation with P/B...

Metrical Inc

Board Diversity Also Confuses Ends with Means

I would like to discuss the September 18 Nikkei article, "Concurrent Outside Board Member Positions to Increase by 40% to 2,500 in 2023, Due to...

Metrical Inc

Manager's Real Intent to Prevent Further Increase in Ratio of Independent Directors Is Revealed

I would like to discuss the September 11 Nikkei article, "Kankeiren Proposes Revisions to Corporate Governance Code, Making Appointment of Outside...

Metrical Inc

Issues with Content of Disclosures, Not Keyword Searches in TCFD

I would like to discuss the issues of the Nikkei article "Financial Impact of Climate Change: Over 1,000 Companies Mentioned in Annual Securities...

Metrical Inc

Policy Shareholdings, if Reduced, Should Be Used for Profitable Investments

I would like to discuss the issues on the Nikkei Shimbun article of September 8 titled Listed Companies' Policy Stocks Lowest: Hitachi and Others...

Metrical Inc