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>The number of shareholder proposals in June 2022 was 241, significant increase from 136 in June 2021. It's expected that the number of shareholder proposals will increase again this year.</li>
<li>The increase in the percentage of shareholder proposals recommended by voting advisors can be considered an increase in shareholder proposals that are quite reasonable from the shareholder's point of view.</li>
<li>The percentage of overseas investors in favor of shareholder proposals increased, while that of domestic institutional investors remained unchanged at 7%, the same as the previous year.</li>
</ul>


The number of shareholder proposals in June 2022 was 241, significant increase from 136 in June 2021. It's expected that the number of shareholder proposals will increase again this year.
The increase in the percentage of shareholder proposals recommended by voting advisors can be considered an increase in shareholder proposals that are quite reasonable from the shareholder's point of view.
The percentage of overseas investors in favor of shareholder proposals increased, while that of domestic institutional investors remained unchanged at 7%, the same as the previous year.


Different Criteria for Exercising Voting Rights for Overseas and Domestic Institutional Investors

<ul>
<li>Since the revised Corporate Governance Code in 2021 requires TCFD disclosure for prime market listed companies, TCFD disclosure is expected to expand to all prime listed market companies going forward.</li>
<li>Most companies do not have a roadmap for meeting their emissions targets, and there is a need to look carefully at whether their numerical targets and timelines are reasonable.</li>
<li>Until now, companies that preceded TCFD disclosures have mainly disclosed information in integrated reports. However, attention will focus on how these information will be disclosed in the Annual Securities Report.</li>
</ul>


Since the revised Corporate Governance Code in 2021 requires TCFD disclosure for prime market listed companies, TCFD disclosure is expected to expand to all prime listed market companies going forward.
Most companies do not have a roadmap for meeting their emissions targets, and there is a need to look carefully at whether their numerical targets and timelines are reasonable.
Until now, companies that preceded TCFD disclosures have mainly disclosed information in integrated reports. However, attention will focus on how these information will be disclosed in the Annual Securities Report.


Comparability of Disclosures Between Companies Will Enhance Content of Sustainability Information

<ul>
<li>Regarding the three most in-demand documents, only 30-50% of companies with over 30% foreign ownership disclose them in English. The mismatch between overseas investors' demand and companies' disclosure continues.</li>
<li>If TSE requires faster timing of disclosure in English, companies may limit the materials they disclose in English due to increased burden. Disclosing necessary materials is more important than timing.</li>
<li>In order to encourage companies to disclose in English in their annual securities reports, the Corporate Governance Code should clearly state the disclosure in English in the annual securities report.</li>
</ul>


Regarding the three most in-demand documents, only 30-50% of companies with over 30% foreign ownership disclose them in English. The mismatch between overseas investors' demand and companies' disclosure continues.
If TSE requires faster timing of disclosure in English, companies may limit the materials they disclose in English due to increased burden. Disclosing necessary materials is more important than timing.
In order to encourage companies to disclose in English in their annual securities reports, the Corporate Governance Code should clearly state the disclosure in English in the annual securities report.


Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand

<ul>
<li>The Nikkei article addresses high-dividend investing as short-term strategy, while "Quality Income" is in demand by long-term investors seeking stable long-term performance. Both strategies have different investor segments and needs.</li>
<li>Many Japanese companies have basic policy of "stable dividends," but it is easier for shareholders seeking to increase shareholder interests to understand a dividend policy based on clear cash allocations.</li>
<li>Given that Metrical's analysis also found no correlation between changes in market capitalization and dividend policy scores, linking dividends and stock price is a difficult problem.</li>
</ul>


The Nikkei article addresses high-dividend investing as short-term strategy, while "Quality Income" is in demand by long-term investors seeking stable long-term performance. Both strategies have different investor segments and needs.
Many Japanese companies have basic policy of "stable dividends," but it is easier for shareholders seeking to increase shareholder interests to understand a dividend policy based on clear cash allocations.
Given that Metrical's analysis also found no correlation between changes in market capitalization and dividend policy scores, linking dividends and stock price is a difficult problem.


"Stable Dividend" Tradition May Have Something to Do with Rewarding Cross-Held Shareholders

<ul>
<li>There seems to be consensus on the end of the transitional measures in 3 years. Even if this issue is finally settled, the issue of prime market quality will remain.</li>
<li>There’s no better solution to raise stock price than for companies to develop their own strategies and expand corporate value. TSE should promote metabolism and improve quality of the market.</li>
<li>If the quality of corporate governance is an issue, it is necessary to encourage change in boards that are dominated by male internal executive directors and lack diversity.</li>
</ul>


There seems to be consensus on the end of the transitional measures in 3 years. Even if this issue is finally settled, the issue of prime market quality will remain.
There’s no better solution to raise stock price than for companies to develop their own strategies and expand corporate value. TSE should promote metabolism and improve quality of the market.
If the quality of corporate governance is an issue, it is necessary to encourage change in boards that are dominated by male internal executive directors and lack diversity.


Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform

Japan

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TSE Tokyo Price Index TOPIX (TPX INDEX)

Different Criteria for Exercising Voting Rights for Overseas and Domestic Institutional Investors

I would like to discuss the issues on the date of "Status of Approval Rates for Shareholder Proposals by Proposal" published by the TSE on January...

Metrical Inc

Comparability of Disclosures Between Companies Will Enhance Content of Sustainability Information

I would like to discuss the issues on the materials of the survey on the actual status of information disclosure in line with the TCFD...

Metrical Inc

Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand

I would like to discuss the summary and the issues on the materials published by TSE on January 17 in its Survey on the Implementation Status of...

Metrical Inc

"Stable Dividend" Tradition May Have Something to Do with Rewarding Cross-Held Shareholders

I would like to discuss the January 16 Nikkei article, "Determining 'Willingness and Ability' to Invest in High-Dividend Stocks; Signs of Stocks...

Metrical Inc

Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform

I would like to discuss the issues on the materials of the 6th Follow-up Meeting on the Revision of Market Segmentation disclosed by the TSE on...

Metrical Inc