< IJ report > ICGN Annual Conference 2019, Tokyo
July 25, 2019
Japanese government and business leaders, including Prime Minister Shinzo Abe on video, welcomed foreign guests to the Annual Conference of International Corporate Governance Network (ICGN), held in Tokyo at Hotel New Otani, July 16-18.
Japanese attendees, keenly aware of the huge foreign presence in the Tokyo market, were relieved to hear generally positive remarks from foreigners about Japan’s corporate governance reform efforts. It is still not certain whether Japan’s stock market has gathered enough momentum for sustainable growth, but Japanese participants were reassured about their position in a transitioning global investment climate.
Many “welcome to Japan” messages
ICGN, a London-based international body of institutional investors, sponsored the annual conference for 450 attendees, following its annual general meeting of members at the same location.
Tokyo Stock Exchange (TSE) and Japan Exchange Group (JPX) served as hosts. In his opening remarks, Koichiro Miyahara, President and CEO of TSE, explained recent developments in corporate governance and ESG (environment, social and governance) investment in Japan to a large number of visitors from abroad. In closing, Mr. Miyahara made a gentle plug for their return, saying, “We look forward to seeing you when you come back for the Olympic Games.”
Guests were warmly welcomed by all of their Japanese hosts. In addition to appearances by top executives from major companies and senior Japanese government officials, including Commissioner of Financial Services Agency (FSA) Toshihide Endo, attendees were greeted by Prime Minister Abe via a video message thanking ICGN for recognizing his government’s corporate governance initiatives. Abe pledged to increase efforts to make the Japanese capital market more attractive to foreign investment.
From the non-government sector, Japan Business Federation (Keidanren) showed strong support for the ICGN conference. Takashi Hibino, Vice Chair of Keidanren and Chairman of Daiwa Securities Group Inc. took part in the keynote interview session with Kerrie Warring, CEO of ICGN. Additional leaders from Keidanren member companies, such as Asahi Group Holdings, Shionogi & Co. and Mitsui Chemicals, participated in panel discussion sessions.
Japanese speakers emphasized the progress made by domestic listed companies since 2014, when the Abe government first promoted corporate governance reform as a primary growth strategy of Abenomics. Hiro Mizuno, CIO of Government Pension Investment Fund (GPIF), was particularly popular among foreign attendees due to his fluent English and his influential position as the fund manager of over 150 trillion yen. Mizuno explained GPIF’s role as the leader of long-term sustainable investment in Japan, and his comments were frequently recalled by foreign speakers during the remainder of the conference.
Japan buoyed by positive response to reform
Given the weak performance of Japanese stocks in the first half of 2019, Japanese attendees were anxious to hear from foreign investors, who hold one-third of stocks on the TSE. Participants were cheered by the largely positive responses among foreign investors to governance reform and took some pride in recent achievements in ESG. As some noted, Japan added the most signatories (more than 170 so far) to the Recommendation of the Task Force on Climate-related Financial Disclosure (TCFD). Encouraged by Keidanren and others, the new signatories were keen to declare their support for TCFD, despite the increased reporting requirements for environmental issues.
Foreign speakers noted areas where Japanese companies could use more improvement, including diversity on corporate boards and management, while recognizing the progress made in recent years. For their part, Japanese business leaders acknowledged the need for further corporate governance reform, in light of the recent scandals at Nissan Motor Corp. and LIXIL Corp.
Many challenges remain
Overall, the ICGN conference offered the Japanese investment and business communities a good opportunity to re-evaluate themselves and commit to new challenges.
The latest ICGN Policy Priorities published on the first day of the conference identified corporate reporting, board independence, and board evaluation and nomination committees as the top three areas in need of improvement. These are important issues for companies and investors around the world, but what is the most pressing issue for reform in Japan? According to ICGN CEO Waring at a July 16 press conference, it’s “accountability and building trust.” “That’s why a memorandum of understanding was signed between Keidanren and ICGN last month. Investors and Keidanren companies have different points of view on many issues. But at least they have started looking at each other face-to-face, building trust, and understanding fully each other’s positions and their mutual interest in how to enhance long-term corporate value, which ultimately benefits society as a whole.”
Among Japanese, the government-led approach has been popular among companies and investors as usual. The two government-sponsored Codes — for Corporate Governance and Stewardship — have been effective drivers of governance reform and most expect them continue to fostering gradual improvements. Yasuyuki Konuma, Executive Managing Director at TSE, said at the same press conference, “Among TSE-listed companies, more than a few have become leaders in governance reform and other changes. TSE will promote the good practices adopted by leading companies to encourage more companies to make changes. With the two Codes, and efforts by TSE and others, I hope we can gradually extend these positive reforms to companies across the Exchange.”
Over its two-and-half days the ICGN conference brought together institutional investors, asset managers, major companies, consultants and public officials from around the world to address difficult issues. The forum allowed for serious discussion of common challenges such as aging societies, artificial intelligence, climate change, disclosure rules, systemic risks, and more. While nothing was solved, participants gained an understanding of each other’s concerns and approaches to these problems.
The conference concluded as Mr. Konuma, with a happy smile, introduced next year’s host, Ron Mock, CEO at Ontario Teachers’ Pension Plan (OTPP).
< Ben Wada >