Category

ESG

Jan 14
0

Daily Brief ESG: Transitional Measures Will End in 2-3 Years and more

By | Daily Briefs, ESG

In today’s briefing:

  • Transitional Measures Will End in 2-3 Years, but Will Prime Market Listing Criteria Remain the Same?

Transitional Measures Will End in 2-3 Years, but Will Prime Market Listing Criteria Remain the Same?

By Aki Matsumoto

  • TSE will probably settle on a compromise: “transitional measures will be completed as soon as possible,” while “measures to minimize negative impacts will also be adopted.
  • Of 271 companies that failed to meet prime market listing criteria and are allowed to list under transitional measures, 227 (98%) don’t have tradable market capitalization of 10 billion yen.
  • The market capitalization of companies that disclosed plans to meet listing criteria within 3 years increased, while those that stated that they would meet criteria in over 3 years decreased.

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Jan 12
0

Daily Brief ESG: It’s Not Who The Directors Come From and more

By | Daily Briefs, ESG

In today’s briefing:

  • It’s Not Who The Directors Come From, but Their Skills and Ability to Fulfill Their Fiduciary Duties

It’s Not Who The Directors Come From, but Their Skills and Ability to Fulfill Their Fiduciary Duties

By Aki Matsumoto

  • People who can make business strategy decisions that are economic sense should be hired to serve on the board, not necessarily investors or financial experts.
  • If the motivation to increase corporate value is weak, linking the compensation of directors to the expansion of corporate value or granting them the company’s stock is an alternative.
  • Investors aren’t necessarily the only ones with conflicts of interest with shareholders. Founders hold significant shares, and the same problem can be assumed for directors from financial institutions with cross-shareholdings.

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Jan 10
0

Daily Brief ESG: A Company Invested by an Activist Should Understand that It’s Not Fully Exploiting Its Potential and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Company Invested by an Activist Should Understand that It’s Not Fully Exploiting Its Potential

A Company Invested by an Activist Should Understand that It’s Not Fully Exploiting Its Potential

By Aki Matsumoto

  • Since the median P/B of companies listed on TSE is 1.0, Japanese companies will continue to attract the keen attention of activist investors around the world.
  • Many Japanese managers can rest on their laurels with share prices that don’t command premium because of silent shareholders like cross-holding and BoJ that little care about share price performance.
  • There are many companies that publish management strategies that only give a sense of doing, and the stock price does not fall but keeps not significantly outperforming.

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Jan 08
0

Daily Brief ESG: More Effective for a Company to Show Background when It Raises Its Dividend Outlook and more

By | Daily Briefs, ESG

In today’s briefing:

  • More Effective for a Company to Show Background when It Raises Its Dividend Outlook

More Effective for a Company to Show Background when It Raises Its Dividend Outlook

By Aki Matsumoto

  • This fiscal year, total dividends paid haven’t increased compared to recovering total net profit. Consequently, the dividend payout ratio has fallen to the low 30% level, normal level for FY2020.
  • The correlations of market capitalization to net profit and to dividends paid both declined from those of the past 10 years, indicating lack of confidence in profits in year ahead.
  • Simply raising the dividend has limited effect on stock price increases. Given that the dividend payout ratio has declined, companies are required to explain how they are using their cash.

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Jan 07
0

Daily Brief ESG: Time to Move Forward to Corporate Governance 2.0 and more

By | Daily Briefs, ESG

In today’s briefing:

  • Time to Move Forward to Corporate Governance 2.0, Where the Substance Will Be Questioned

Time to Move Forward to Corporate Governance 2.0, Where the Substance Will Be Questioned

By Aki Matsumoto

  • Although Fujitec’s corporate governance framework has improved in places, the Statutory Auditor and Nominating Committee aren’t functioning, and the Board of Directors with a majority of independent directors isn’t functioning.
  • METI survey shows that 20% of independent directors are friends of CEO, a glimpse of how companies expect independent outside directors to play a role in endorsing executive management policies.
  • With several revisions of Corporate Governance Code, companies have ostensibly made steady progress in corporate governance efforts. However, whether this has been accompanied by substance varies from company to company.

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Jan 05
0

Daily Brief ESG: How Far Has Corporate Governance Progressed in 2021? (1) ~ Key Actions Section and more

By | Daily Briefs, ESG

In today’s briefing:

  • How Far Has Corporate Governance Progressed in 2021? (1) ~ Key Actions Section

How Far Has Corporate Governance Progressed in 2021? (1) ~ Key Actions Section

By Aki Matsumoto

  • Shareholder returns, including dividend policy and treasury stock retirement/buyback and growth policies improved slightly. Still, cash allocations are weak in both shareholder returns and growth, so cash is piling up.
  • The policy shareholdings is decreasing year by year, but the holdings is so large that they still account for a large % of total assets, so cash is piling up.
  • Companies with ROEs above 12% achieved even higher returns, and Tobin’s Q1.2-1.4 companies (with higher valuations than average) increased slightly. Investors may have valued companies that exhibit higher returns.

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Jan 03
0

Daily Brief ESG: How Far Has Corporate Governance Progressed in 2021? (1) ~ Board Practices Section and more

By | Daily Briefs, ESG

In today’s briefing:

  • How Far Has Corporate Governance Progressed in 2021? (1) ~ Board Practices Section

How Far Has Corporate Governance Progressed in 2021? (1) ~ Board Practices Section

By Aki Matsumoto

  • The revised Corporate Governance Code and the inclusion of prime market listing criteria have resulted in significant improvements in % of independent directors and in the practices of Nominating/Compensation Committee.
  • Meanwhile, the chairmanship of the board of directors and the ratio of female directors, for which the Code didn’t specify improvements or provide numerical target, are improving at modest pace.
  • There is the issue of whether the board/committees require independent directors to function fully independently, and the % of female directors indicates the seriousness of improving management and governance.

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Dec 30
0

Daily Brief ESG: Is the Solution to the Problem to Make the AGM Attractive? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Is the Solution to the Problem to Make the AGM Attractive?

Is the Solution to the Problem to Make the AGM Attractive?

By Aki Matsumoto

  • Since many companies struggle to meet quorum requirements for AGMs, many companies mail accompanying documents along with the voting form in paper form, even though Companies Act has been amended.
  • The use of DX, such as hybrid shareholder meetings and online voting, comes to mind to meet quorum requirements for shareholder meetings, and this will help reduce administrative costs.
  • The fundamental issue, however, is that there are many conventional AGMs with little appeal and little substance, such as few managers whom we would really like to hear speak live.

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Dec 28
0

Daily Brief ESG: Isn’t FSA Too Forward-Thinking to Keep up with the Global Trend in Human Capital Disclosure? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Isn’t FSA Too Forward-Thinking to Keep up with the Global Trend in Human Capital Disclosure?

Isn’t FSA Too Forward-Thinking to Keep up with the Global Trend in Human Capital Disclosure?

By Aki Matsumoto

  • The government’s application of human capital disclosure starting with FY3/2023 companies runs the risk of omitting process of fully discussing and internalizing concept of human capital with company’s management strategy.
  • The government’s policy change to make disclosure of quarterly financial results voluntary in exchange for mandatory disclosure of human capital will likely lead to a setback in information disclosure.
  • Various issues will likely emerge in the future: whether the 3 indicators mandated for disclosure correctly reflect the company’s human capital approach and whether they can be compared among companies.

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Dec 26
0

Daily Brief ESG: Japanese Companies Will Be Selected as One of Global Stocks for Individual Investors in near Future and more

By | Daily Briefs, ESG

In today’s briefing:

  • Japanese Companies Will Be Selected as One of Global Stocks for Individual Investors in near Future

Japanese Companies Will Be Selected as One of Global Stocks for Individual Investors in near Future

By Aki Matsumoto

  • The government’s policy to expand small investment tax exemption program is expected to lead to increase in stock investments. Individuals are keen to invest in stocks with higher performance potential.
  • Trading in U.S. equities is prominent among under-40s generation. It is a rational investment for these generations with higher risk tolerance to invest in foreign equities with higher expected returns.
  • Individuals no longer have a single choice of Japanese equities as they did during the bubble economy, but have begun to select their investment targets as one of global equities.

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