ESG

• Most shareholder benefits items can be used in Japan. There’s history of more companies abolishing shareholder benefits programs because they believed that shareholder returns should conducted rather than shareholder benefits.
• Amid rising foreign ownership and the dissolution of cross-shareholdings, more companies have begun to reverse the trend toward companies approaching individual shareholders with shareholder benefits programs.
• The fact that stock prices of companies offering shareholder benefits tended to fall lower during stock market plunges may be due to the fact that they were mostly defensive stocks.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Flos B&B Italia’s (formerly International Design Group) ESG as “Adequate”. The group has “Adequate” scores for the Environmental and Social pillars, while Governance is “Strong”. Controversies are “Immaterial” and Disclosure is “Strong”.

• 42 companies submitted their annual securities reports by the business day before AGM date, and most of them submitted their reports immediately before AGM, such as the day before AGM.
• If the record date is moved forward from fiscal year-end, the problem of administrative burden will be solved. English-disclosure in annual securities reports will increase, and engagement will be positive.
• For companies with a record date in their articles of incorporation, changing the record date would require general shareholders’ meeting, but only a few shareholders would oppose the change.

• The cause of the lower female managerial positions behind gender wage gap is clear, but even proposed amendment to the Act seem to be a detour to solve the problem.
• What hasn’t worked 40 years after the Equal Employment Opportunity Law is that there’re no penalties and the environment has always been one in which it’s permissible not to achieve.
• Effort goals are cozy for both the government, which can feel sense of doing by launching effort goals, and companies that will not be blamed if they don’t achieve them.

• The fact that few companies promptly retire treasury stock is the reason for the large gap between market capitalization including treasury stock and market capitalization calculated without including treasury stock.
• It’s odd that EV/EBITDA of a company will be smaller after cancelling treasury shares than before, but this shouldn’t be too much trouble for institutional investors who analyze it closely.
• Although this gap may widen for more companies as more cross-shareholdings will be bought back with treasury stock, the increase in share repurchases is a favorable development.

• Listed subsidiaries and affiliates are now required by the TSE to disclose their basic thoughts on their business portfolio strategy and the rationale for being listed.
• M&A is expected because Japanese companies have not taken effective steps to expand their corporate value as cash on hand is building up and ROE is sluggish.
• M&A is likely to be mostly conducted by domestic companies or investment funds as a result of industry restructuring and business portfolio restructuring in Japan.

• While the homework imposed on companies has been increasing year by year, TSE’s market restructuring and “request to raise P/B” have made companies directly aware of the cost of listing.
• MBO is a company’s choice to go private as a result of the cost of maintaining a public listing. Many companies have yet to reach this conclusion.
• The conversion of listed subsidiaries into wholly owned subsidiaries is a conclusion that has finally been reached; 230 listed subsidiaries will have to come to some conclusion eventually.

• Besides not showing concrete measures to increase corporate value, the feasibility of the plan and the valuation at that time are often not verified, so disclosures that don’t add up.
• Listed subsidiaries and equity method affiliates account for 31.8% of all listed companies. The company is still in the process of restructuring its business portfolio.
• The growth of each company’s corporate value and stock market capitalization will be determined by how quickly issues that have not been initiated so far are resolved.

• Stock sale allows brokers to pass on to the company the attraction of being able to diversify its shareholders, and the cross-shareholding sales scheme allows them to obtain higher commissions.
• One of the solutions that companies have come up with in the absence of improved return on capital is to reduce their policy shareholdings.
• The use of share repurchases to buy back cross-shareholdings is a very good way to improve return on capital because it also reduces the amount of cash on hand.

• Engagement begins only when there is a common understanding that “the management goal is to increase corporate value and shareholder interest.
• Because of differences in the level of understanding among listed companies, not all companies are able to smoothly discuss solutions to management issues based on the same common understanding.
• While ROA improved moderately, ROE improved slightly, indicating that more and more companies are committed to shareholder returns.