The gender balance of corporate management is under scrutiny from shareholders. A major company whose directors are all men. At the General Meeting of Shareholders held in March, the extraordinary situation in which top management was barely reappointed as a director with a majority of votes in favor caused shockwaves among companies. What's going on? Explore the background. (Economic Affairs Reporter, Neil Kato)

Big manager is narrowly reappointed and shocked

The General Meeting of Shareholders of Canon, a major precision machinery manufacturer, was held on March 3.

Only 27.87% of shareholders supported the company's proposal to reappoint Fujio Mitarai, 50, chairman and president and CEO, who has served as top management for more than 59 years.

With just the majority needed for reappointment, the result was like stepping on thin ice.

Mr. Mitarai is a tycoon who also served as chairman of Keidanren. As a result, there was a shock among companies ahead of the shareholders' meeting season.

Strict scrutiny of zero female directors

Why did this happen?

One of the reasons is the scrutiny of shareholders for gender balance.

The five director candidates proposed by the company are all men and none are women. It seems that there were quite a few shareholders who judged that diversity was lacking.

The company that seems to have influenced the decisions of shareholders is ISS, an American proxy advisory firm. The firm, which advises investors on the pros and cons of shareholder proposals, revised its advisory policy in February to recommend that companies that do not have a single woman on their boards of directors oppose the appointment of top executives.

Mr. Fujio Mitarai

We also recommended "oppose" to Canon's proposal for the reappointment of Mr. Mitarai.

Glass Lewis, an American advisory firm that is influential alongside the ISS, also has a policy of requiring at least 10% of companies listed on the prime market to be female directors. If this criterion is not met, the Chairman of the Board of Directors or the Chairman of the Nominating Committee will be recommended to disagree.

However, this time, he said, "In view of the company's efforts toward gender diversity, we will refrain from recommending opposition, and we will continue to monitor this issue."

Canon commented on Mitarai's narrow reappointment:

Canon's comment:
"I understand that this is the result of an increase in the number of institutional investors who voted against the proposal because of the absence of female directors. On the other hand, there are two female executive officers and a foreign executive officer. Therefore, we believe that we are able to secure sufficient diversity in our daily management, but we will continue to work to ensure even greater diversity through careful dialogue with our shareholders."

Institutional investors focus on gender balance

In recent years, there has been a growing emphasis on gender balance among institutional investors in Japan.

Of these, Nomura Asset Management changed the criteria for exercising voting rights in November last year. If there are no female directors, we will oppose the reappointment of directors such as the chairman and president.

In addition, from June this year, Nissay Asset Management has stated that it will oppose the appointment of a representative director for TOPIX 11 target companies if there are no female directors.

Why are institutional investors paying attention to the diversity of companies? To find out the background, we visited Sumitomo Mitsui DS Asset Management.

Since January of this year, the company has tightened the standards for diversity required of companies. In the case of companies listed on the Prime Market, if there is no female director, in principle, we will oppose the appointment of a representative director. We place emphasis on increasing corporate value over the medium to long term.

Sumitomo Mitsui DS Asset Management Junichi Sakaguchi, Responsible
Investment Officer: "By having members of different genders and nationalities actively discuss from different perspectives, we can avoid risks and deal with changes in the environment and governance issues.

What is the current state of Japan?

So, what is the current situation of Japan companies?

In Europe and the United States, some countries and states have adopted a "quota system" that obliges the appointment of female executives at a certain rate, and according to a survey conducted by the OECD = Organisation for Economic Co-operation and Development last year, some countries have more than 40% of female executives.

However, in major Japan companies, the percentage of female executives is only 15.5%.


The Financial Services Agency, which is working to reform the corporate governance of listed companies, announced an action plan in April. We have set a goal of increasing the ratio of female executives at listed companies to more than 4% by 2030.

Fostering female management personnel

However, achieving goals is not easy.

According to a survey of 6 companies held a general meeting of shareholders by Mitsubishi UFJ Trust and Banking last June, only nine companies had more than 187% female directors.

The breakdown of female officers shows that 30% are outside directors. Less than 9% of employees were promoted from within the company. Many companies have female directors from outside the company, such as lawyers and university professors.

Companies are competing for female executives for talent. As a result, there are many female directors who work for multiple companies.

Miki Akasaka, Group Manager of Mitsubishi UFJ Trust and Banking Corporation Consulting Department, points out that companies need to make serious efforts to develop female management personnel.

Miki Akasaka, Group Manager
, Consulting Department, Mitsubishi UFJ Trust and Banking Corporation, said, "We believe that the movement to demand diversity among executives will intensify, but it is not enough to increase the number of female directors and simply arrange their appearance. In order for companies to increase their value, they need to develop diverse human resources, including women."

How do we nurture female leaders over the medium to long term, and how do we promote them to executives? Companies are also being asked to have the ability and strategy to produce diverse human resources.

As the general meeting of shareholders season approaches, it will be interesting to see how investors' stance and corporate stance will change regarding the appointment of female directors.

Upcoming

The General Meeting of Shareholders of Seven & i Holdings will be held on the 25th. Investment funds are calling for the resignation of some directors over the reorganization of the group, and the fate of the vote is attracting attention.

Also on the 25th, the minutes of the FOMC = monetary policy meeting held by the Federal Reserve, which is the central bank of the United States, will be released in early May. It is interesting to see how the successive bank failures in the United States affected policy, and what kind of exchanges there were about future rate hikes.