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.

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.

<ul>
<li>The fact that institutional investors consider whether a company has zero female board members when voting has led to decrease in the number of companies with zero female board members.</li>
<li>Since fewer companies have zero female board members but a minority of companies have at least two female board members, achieving 30% female board members seems somewhat of a hurdle.</li>
<li>While tenure and concurrent service of female board members are problematic, the starting point is to ensure that women have  a 30% voice on the board and to promote diversity.</li>
</ul>


The fact that institutional investors consider whether a company has zero female board members when voting has led to decrease in the number of companies with zero female board members.
Since fewer companies have zero female board members but a minority of companies have at least two female board members, achieving 30% female board members seems somewhat of a hurdle.
While tenure and concurrent service of female board members are problematic, the starting point is to ensure that women have  a 30% voice on the board and to promote diversity.


The Goal of 30% Female Board Members Is Somewhat Hard to Achieve Given the Current Situation

<ul>
<li>High ratio of female non-regular workers and low ratio of women in management positions are factors behind the gender wage gap. Government expects to correct the gap in individual companies.</li>
<li>Companies should improve making it easier for employees returning jobs after temporary leave for childcare/childbirth, and treating them in the same position they were before leaving after temporary leave.</li>
<li>In order for women to have access to higher education and for women to work without leaving the workforce temporarily, the values that endorse gender inequality must be removed.</li>
</ul>


High ratio of female non-regular workers and low ratio of women in management positions are factors behind the gender wage gap. Government expects to correct the gap in individual companies.
Companies should improve making it easier for employees returning jobs after temporary leave for childcare/childbirth, and treating them in the same position they were before leaving after temporary leave.
In order for women to have access to higher education and for women to work without leaving the workforce temporarily, the values that endorse gender inequality must be removed.


In Addition to Efforts by Individual Companies Values Endorsing Gender Inequality Must Be Removed

<ul>
<li>Since Japan's gender gap index ranks 118th out of 146 countries, stagnating in the lower group, it will take a considerable amount of time to resolve the issue.</li>
<li>A shortcut to the improvement of women's status is to greatly improve the gender ratio in the legislature in order to change the current framework for improving women's status.</li>
<li>Behind the lagging 103rd place in the ratio of female managers is the lack of progress in higher education for women.</li>
</ul>


Since Japan's gender gap index ranks 118th out of 146 countries, stagnating in the lower group, it will take a considerable amount of time to resolve the issue.
A shortcut to the improvement of women's status is to greatly improve the gender ratio in the legislature in order to change the current framework for improving women's status.
Behind the lagging 103rd place in the ratio of female managers is the lack of progress in higher education for women.


Women's Empowerment in Japan Will Still Take a Considerable Amount of Time

<ul>
<li>The dissolution of cross-shareholdings and changing environment in which foreign ownership has risen to 30% have changed the view of activist investors. TSE is one such example of big change.</li>
<li>It's convenient that activist investors can use “TSE requested” language that is both easily understood and undeniable by the company when communicating with the portfolio company to improve its issues.</li>
<li>We must determine whether this is a temporary return to shareholders until the activist investors are removed from the shareholder list, or a shift to value-creating management.</li>
</ul>


The dissolution of cross-shareholdings and changing environment in which foreign ownership has risen to 30% have changed the view of activist investors. TSE is one such example of big change.
It's convenient that activist investors can use “TSE requested” language that is both easily understood and undeniable by the company when communicating with the portfolio company to improve its issues.
We must determine whether this is a temporary return to shareholders until the activist investors are removed from the shareholder list, or a shift to value-creating management.


Determine Whether Shareholder Return Is a Temporary Measure or a Shift to Value-Creating Management

<ul>
<li>Competition little work because the portfolio company had advantage over competitors in business. This distorted competitive environment may have prevented the beneficiaries from receiving the benefits they should have received.</li>
<li>If the business was advanced by competitive advantage through the ownership of shares in the portfolio company, the beneficiaries may not have received the benefits that they should have received.</li>
<li>The question is whether the life insurers are exercising their voting rights properly for the benefit of the beneficiaries in the shares of client companies they hold.</li>
</ul>


Competition little work because the portfolio company had advantage over competitors in business. This distorted competitive environment may have prevented the beneficiaries from receiving the benefits they should have received.
If the business was advanced by competitive advantage through the ownership of shares in the portfolio company, the beneficiaries may not have received the benefits that they should have received.
The question is whether the life insurers are exercising their voting rights properly for the benefit of the beneficiaries in the shares of client companies they hold.


Is It Difficult to Separate Business Relationships from Proxy Voting?

Executive Director, Co-head of CG Research, Metrical Inc.
METRICAL INC. is a corporate governance(CG)research, investment research and consulting firm in Japan, offering a full service CG research and solutions to investors, public companies and other wide range of organizations globally. http://www.metrical.co.jp/