Survey of global institutional investors calls for Japanese companies to initiate engagement with shareholders.

18 Apr, 2013

Japanese companies should take the initiative and engage in meetings and dialogue with institutional investors to inform them about governance practices and correct misperceptions, according to a surveywhose results were announced today by Sodali and J-Eurus IR.

 

The Sodali J-Eurus survey polled key global institutional investors from the firms’ database to determine how Japanese companies are perceived on corporate governance and related matters.  In addition, the survey examined the sources of information and methodologies used by these investors to evaluate Japanese companies and vote their shares at annual meetings.  The survey questions generated an unusually strong response.  Forty-three institutional investors, including many of the firms with the largest equity investments in Japanese companies, responded to the survey.

The survey confirmed the widely-held view that institutional investors have a negative perception of Japanese corporate governance.  Rating the performance of Japanese companies on average against companies in other developed markets, “corporate governance policy” received the lowest score of only 1.79 on a scale of 1 (poor) to 5 (excellent).

“This result was not a surprise,” said John Wilcox (pictured), Sodali chairman.  “What was surprising is that negative perceptions about corporate governance seem to have a spillover effect in areas where Japanese companies are on a par or do relatively better than their peers in other countries — environmental practices, sustainability, financial disclosure.  The lesson is that Japanese companies are broadly impacted by investors’ governance concerns and need to work aggressively to counteract them.” he noted.

Yoshiko Iwata, president of J-Eurus, noted that investors’ responses relating to governance and share voting policies – as well as the specific comments they submitted confidentially — reflect awareness that Japanese business traditions and culture differ from other countries.  “However, this awareness does not reduce investors’ concerns about corporate governance,” she said.

Yoshiko Takayama, J-Eurus managing director, noted that investors responding to the survey do not support a rules-based approach to governance in Japan, but favor the European Union’s principles-based, comply-or-explain model.  “This is an invitation to Japanese companies to meet the governance challenge on their own terms,” she said.

“Some companies may wish to consider voluntary governance reform, following the example of Toyota Corporation, which has been widely praised for its recent decision to add three outside directors to its board,” she said.

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