Category

ESG

Dec 07
0

Daily Brief ESG: Not Which KPI Is Better and more

By | Daily Briefs, ESG

In today’s briefing:

  • Not Which KPI Is Better, but What Is Shared Between Investors and Managers to Achieve the Same Goal

Not Which KPI Is Better, but What Is Shared Between Investors and Managers to Achieve the Same Goal

By Aki Matsumoto

  • There is a gap between investors, who seek KPIs that reflect future cash flows and cost of capital to determine the prospects for corporate value, and the company.
  • Many companies aren’t able to manage investment and return by business, and under such conditions it is difficult to show future investments and growth prospects in a mid-term business plan.
  • Metrical’s analysis shows that simply increasing shareholder returns isn’t sufficient to raise market capitalization; growth policy and capital allocation policy must be systematically established as part of management policy.

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Dec 02
0

Daily Brief ESG: Again and more

By | Daily Briefs, ESG

In today’s briefing:

  • Again, It Is the BOJ’s ETF Issue that Makes Us Think

Again, It Is the BOJ’s ETF Issue that Makes Us Think

By Aki Matsumoto

  • Although the stock split doesn’t raise the intrinsic value of the stock, the stock price is likely to rise on the speculation that future purchases into the NISA are expected.
  • As cross-shareholdings decline, the companies are actively engaging in IR activities with individual investors to secure shareholders who share the company’s position against foreign shareholders who are increasing their presence.
  • Some believe that NISA will be used as receptacle for the disposal of BOJ’s ETF holdings, but companies may hope that the silent shareholder hold ETFs as long as possible.

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Nov 30
0

Daily Brief ESG: Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

By Aki Matsumoto

  • There are 236 companies with a trading unit of more than 500,000 yen, while there are 967 companies with a trading unit of less than 50,000 yen on the TSE.
  • It’s fair to amend the law to abolish the share unit system, but changing the law takes time. It’s also unclear why “between 50,000 yen and 500,000 yen” is appropriate.
  • While TSE still allows 300 companies that don’t meet the listing criteria to be listed on prime market, TSE requires companies with higher stock prices to increase their administrative burden.

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Nov 29
0

Daily Brief ESG: Can Drastic Governance Reform Be Postponed While Performance Expands? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Can Drastic Governance Reform Be Postponed While Performance Expands?

Can Drastic Governance Reform Be Postponed While Performance Expands?

By Aki Matsumoto

  • The number of independent directors has increased but hasn’t reached a majority, the President chairs the Board of Directors, and the company hasn’t moved to Company with US type-3-committees structure.
  • Stock options were granted to directors and employees in 2017, which may have motivated them to fraudulently book sales. The company may have had corporate culture of low compliance awareness.
  • Foreign shareholders own 50.1%, compared to the founding members’ combined shareholding of 8.6%. It’s unlikely the current lukewarm governance reforms will be forgiven if earnings slow or further scandals occur.

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Nov 26
0

Daily Brief ESG: High Cost of TOPIX and more

By | Daily Briefs, ESG

In today’s briefing:

  • High Cost of TOPIX, Which Currently Contains Illiquid Stocks, Is Considered to Be Borne by Users

High Cost of TOPIX, Which Currently Contains Illiquid Stocks, Is Considered to Be Borne by Users

By Aki Matsumoto

  • It’s unclear whether the stocks that lost ％ TOPIX had been overpriced or whether selling pressure caused temporary underperformance. However, it’s clear these illiquid stocks are unsuitable for institutional investors.
  • While users want TOPIX liquidity to increase, TSE insists on aligning its criteria for TOPIX stock selection with prime market listing criteria, which takes precedence over the interests of users.
  • Rather than asking these companies to take on daunting task of dramatically raising both profit margins and growth, TSE should bring TOPIX criteria to threshold that institutional investors invest in.

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Nov 24
0

Daily Brief ESG: Without Disclosure and Ensuring Transparency and more

By | Daily Briefs, ESG

In today’s briefing:

  • Without Disclosure and Ensuring Transparency, the Black Box on Compensation Will Increase

Without Disclosure and Ensuring Transparency, the Black Box on Compensation Will Increase

By Aki Matsumoto

  • Progress on ESG initiatives should be evaluated objectively. With insufficient transparency and disclosure of compensation, there is concern that incorporating ESG factors into compensation will further increase uncertainty.
  • Leadership is required for management to seek the evolution of essential initiatives so that ESG efforts don’t fall into “numbers matching” and not be intimidated by temporary setbacks or modifications.
  • There are the following unresolved issues: non-disclosure of individual director compensation, bias toward fixed compensation, opaque compensation formulas, and ensuring the independence of the Compensation Committee.

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Nov 23
0

Daily Brief ESG: Should the 2022 Annual Meeting of Shareholders Be Regarded as Constant Progress? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Should the 2022 Annual Meeting of Shareholders Be Regarded as Constant Progress?

Should the 2022 Annual Meeting of Shareholders Be Regarded as Constant Progress?

By Aki Matsumoto

  • Early disclosure of convocation notices and the use of electronic voting platforms, as specified in Corporate Governance Code, and electronic voting, which reduces the companies’ administrative burden, have also progressed.
  • Although the provision of English-language convocation notices was included in the Corporate Governance Code, only a few companies still send all documents in English translation.
  • More than 10 years after the regulatory-changes, few companies still file their annual securities reports prior to AGMs. Few companies take such a proactive approach by changing their company workflow.

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Nov 20
0

Daily Brief ESG: Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality and more

By | Daily Briefs, ESG

In today’s briefing:

  • Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

By Aki Matsumoto

  • 72.9% of companies in prime market complied with the principles of Corporate Governance Code, which defines the concept of ensuring diversity, but no specific targets were set in their disclosures.
  • If % female directors were raised to 30%, they should be recruited from within the company to executive directors, but very few companies have % female managers exceeding 30%.
  • Gender discrimination in hiring, gender disparity in access to higher education, issues of leaving/returning to work due to childbirth and child rearing, and gender discrimination in workplace must be resolved.

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Nov 18
0

Daily Brief ESG: Quarterly Disclosure Discussions Leave Investor Perspectives Behind and more

By | Daily Briefs, ESG

In today’s briefing:

  • Quarterly Disclosure Discussions Leave Investor Perspectives Behind

Quarterly Disclosure Discussions Leave Investor Perspectives Behind

By Aki Matsumoto

  • FSA, which wanted to add Sustainability section, could reach a compromise with companies that wanted to eliminate quarterly disclosures, but but the discussion of the substantive issues took a backseat.
  • Since it would be impossible for the supervisory authority not to take action in cases that may occur in future despite empirical evidence, FSA will impose some penalties for misstatements.
  • Continuity of information is of utmost importance because if a company that has disclosed quarterly stops doing so, investment decisions will be affected by reduced information available for judging stock-valuation.

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Nov 16
0

Daily Brief ESG: Lax Governance Would Affects Not Only Occurrence of Scandals and more

By | Daily Briefs, ESG

In today’s briefing:

  • Lax Governance Would Affects Not Only Occurrence of Scandals, but Also Areas Such as Competitiveness

Lax Governance Would Affects Not Only Occurrence of Scandals, but Also Areas Such as Competitiveness

By Aki Matsumoto

  • By nature, management is expected to establish an organizational structure that ensures compliance with laws and regulations, and to put in place a management system to ensure such compliance. 
  • This is a governance issue, but it goes beyond that. If a loose corporate culture permeates the company, it would have an impact on various areas, such as reduced competitiveness.
  • Based on the analysis of Metrical Score, companies that have enhanced their corporate governance and performed stable earnings and high stock valuations would have minimized risk of falling into scandal.

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