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>TSE, which receives listing fees from listed companies, has no choice but to take a negative attitude toward raising listing criteria that would reduce the number of listed companies.</li>
<li>Behind many companies with stagnant P/Bs is the fact that managers lack stock price consciousness and companies with stock price stagnation for years eliminated and continue to be listing.</li>
<li>In Japan, it is expected that industry restructuring, dissolution of parent-subsidiary listings, and going private will further increase through M&amp;As, leading to a shakeout in the Japanese market.</li>
</ul>


TSE, which receives listing fees from listed companies, has no choice but to take a negative attitude toward raising listing criteria that would reduce the number of listed companies.
Behind many companies with stagnant P/Bs is the fact that managers lack stock price consciousness and companies with stock price stagnation for years eliminated and continue to be listing.
In Japan, it is expected that industry restructuring, dissolution of parent-subsidiary listings, and going private will further increase through M&amp;As, leading to a shakeout in the Japanese market.


TSE Should Shift Its Business Model from Growing Number of Listed Companies to Expanding Market Cap

<ul>
<li>Since very few companies disclosed challenges, efforts to resolve them and progress, it’s unlikely that 'gender pay gap' will be disclosed in convincing manner, with this being the only exception.</li>
<li>Japan's Law for the Promotion of Women's Activities does not prohibit gender discrimination and is not legally binding on gender equality, so the wage gap is only an effort target.</li>
<li>While some proactive companies may accelerate their efforts as disclosures reveal gender pay gap, many are likely to move at modest pace to match the pace of those around them.</li>
</ul>


Since very few companies disclosed challenges, efforts to resolve them and progress, it’s unlikely that 'gender pay gap' will be disclosed in convincing manner, with this being the only exception.
Japan's Law for the Promotion of Women's Activities does not prohibit gender discrimination and is not legally binding on gender equality, so the wage gap is only an effort target.
While some proactive companies may accelerate their efforts as disclosures reveal gender pay gap, many are likely to move at modest pace to match the pace of those around them.


How Much Can 'effort Targets' Speed up the Narrowing of the Gender Pay Gap?

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.</li>
<li>
<a href="https://www.smartkarma.com/entities/anycolor-inc" target="_blank" data-smartkarma-citation="entities:36618:1" rel="noopener">Anycolor (5032 JP)</a> and <a href="https://www.smartkarma.com/entities/lifedrink-co-inc" target="_blank" data-smartkarma-citation="entities:39842:1" rel="noopener">Lifedrink (2585 JP)</a> have already confirmed their moves to the Prime Market and are expected to have TOPIX Inclusion Events at the end of July 2023.</li>
<li>More recently, <a href="https://www.smartkarma.com/entities/plus-alpha-consulting-co-ltd" target="_blank" data-smartkarma-citation="entities:33441:1" rel="noopener">Plus Alpha Consulting (4071 JP)</a> announced their move to the Prime Market and are likely to have a TOPIX Inclusion Event at the end of August 2023.</li>
</ul>


Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.

Anycolor (5032 JP) and Lifedrink (2585 JP) have already confirmed their moves to the Prime Market and are expected to have TOPIX Inclusion Events at the end of July 2023.
More recently, Plus Alpha Consulting (4071 JP) announced their move to the Prime Market and are likely to have a TOPIX Inclusion Event at the end of August 2023.


TOPIX Inclusions: Who Is Ready (Jul 2023)

<ul>
<li>Companies that accept reductions in policy shareholdings tend to repurchase their own shares. Pressure to reduce policy shareholdings will increase further this year when share prices are rising.</li>
<li>In order to verify whether institutional investors' voting criteria and voting behavior are consistent, the reasons for supporting/opposing individual proposals should be disclosed in more detail.</li>
<li>Investors are expected to base decisions on performance, as voting advisers returned to policy of recommending voting against top management in companies with lower-than-standard ROEs due to recovery from COVID-19.</li>
</ul>


Companies that accept reductions in policy shareholdings tend to repurchase their own shares. Pressure to reduce policy shareholdings will increase further this year when share prices are rising.
In order to verify whether institutional investors' voting criteria and voting behavior are consistent, the reasons for supporting/opposing individual proposals should be disclosed in more detail.
Investors are expected to base decisions on performance, as voting advisers returned to policy of recommending voting against top management in companies with lower-than-standard ROEs due to recovery from COVID-19.


Capital Efficiency Is the Topic of the June AGM, While What Is Happening to Passive Fund Voting?

<ul>
<li>It remains to be seen whether domestic institutional investors will support shareholder proposals on shareholder returns, which had low approval rate among domestic institutional investors at the previous year's AGM.</li>
<li>If domestic institutional investors are voting in favor of shareholder proposals, it wouldn't be surprising if more companies passed them. It's doubtful that passive funds have the same voting practices.</li>
<li>There is concern about critical tone regarding the legally binding nature of the resolution of AGMs, which appears to come from companies feeling threatened by declining shareholdings by banks/business partners.</li>
</ul>


It remains to be seen whether domestic institutional investors will support shareholder proposals on shareholder returns, which had low approval rate among domestic institutional investors at the previous year's AGM.
If domestic institutional investors are voting in favor of shareholder proposals, it wouldn't be surprising if more companies passed them. It's doubtful that passive funds have the same voting practices.
There is concern about critical tone regarding the legally binding nature of the resolution of AGMs, which appears to come from companies feeling threatened by declining shareholdings by banks/business partners.


Although It Is Commendable that Voting Behavior of Some Domestic Institutional Investors Has Changed

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)

TSE Should Shift Its Business Model from Growing Number of Listed Companies to Expanding Market Cap

I would like to discuss the issues on the June 5 Nikkei article titled ""Return the undervalued Japan, Embarking on change through P/B reform."

Metrical Inc

How Much Can 'effort Targets' Speed up the Narrowing of the Gender Pay Gap?

I would like to discuss the issues on the 4 June Nikkei article "Disclosure of gender pay gap goes into full swing, with high interest in...

Metrical Inc

TOPIX Inclusions: Who Is Ready (Jul 2023)

There could be 11 days of volume to buy in Plus Alpha Consulting at the end of August but the secondary offering could create a large overhang...

Janaghan Jeyakumar, CFA

Capital Efficiency Is the Topic of the June AGM, While What Is Happening to Passive Fund Voting?

I would like to discuss the issues on the 4 June Nikkei article “Awakening shareholder meetings: companies and investors should have a serious...

Metrical Inc

Although It Is Commendable that Voting Behavior of Some Domestic Institutional Investors Has Changed

I would like to discuss the issues on the 3 June Nikkei article Shareholder proposals, 82 companies, the largest number, seek stronger shareholder...

Metrical Inc