Unfinished business in Japan
Japan, is a place where change takes time. When work first took me there in the 1980s, I came across the suggestion that the way to learn perseverance was to sit on a rock for three years. Afterwards, so said the proverb, you would be able to warm the coldest stone.
Luckily, I was provided with more comfortable seating in the meetings I attended on behalf of the US Securities and Exchange Commission, but I had to display my fair share of patience. My mission was to open up the Tokyo Stock Exchange. I was initially successful, with the Japanese agreeing to change the rules to permit foreign securities firms to buy seats. It would, however, take another three years of passive resistance before three American and three British firms were actually able to take up their places at the exchange.
Yet something of a transformation now seems to be under way in the boardrooms of Japan's corporate giants. Following years of frustration at the disdain with which many senior Japanese executives viewed their shareholders, Shinzo Abe, prime minister, has made corporate governance reform a pillar of his growth strategy. After a push from him, the Japanese Financial Services Agency and TSE this year introduced a new corporate governance code. It instructs boards to appoint more outside directors to scrutinise management decisions. If they do not, they have to explain why to shareholders.
The proportion of companies on the TSE that have appointed outside directors has grown from 48 per cent in 2010 to 94 per cent in 2015, rising 20 per cent in the past year alone. I myself have recently been elected as an outside director at Lixil, a provider of housing and building products and services.
There is still a long way to go. The ratio of companies with two or more outside directors is also rising, but at only 48 per cent, is still below the standards required in the US or the UK. Nevertheless, the prospect of more efficient use of capital has pushed the Nikkei 225 to its highest levels in two decades.
We need to see not only more outside directors, but also more foreigners, who are freer to ask difficult questions. They do not bear the burden of what has gone before or the social and cultural codes that can hinder local counterparts.
Japanese groups are well aware that foreigners appointed to their boards will not stay quiet if they see mistakes being made. Corporate Japan followed every twist and turn of the Olympus scandal, and every chairman knows the name of Michael Woodford, the British chief executive who exposed hidden losses at the company that amounted to hundreds of millions of pounds. With that knowledge, any Japanese company that chooses to appoint a foreigner is indicating it is prepared to take on the extra level of scrutiny involved. I have been received warmly at the meetings I have attended recently - precisely because I am not Japanese and therefore bring a different perspective. It helps that I am something of a novelty. There are still only a very limited number of foreign female directors at Japanese companies.
Boardroom underrepresentation of women is common the world over, but Japan has nonetheless been a poor performer in regard to gender equality throughout the workplace. When attending a business meeting at a large Japanese bank in the 1980s I was approached by a photographer taking pictures for a university careers brochure. Surprised, I asked whether this was a signal to students that the bank was prepared to appoint female executives. "Of course not", came the reply, "but you'll look nice in the prospectus".
Things have improved since but getting more women into work in Japan, let alone breaking through the glass ceiling and into senior roles, will be a long process that requires constant pressure not just from politicians, but from business leaders themselves. We must persevere. As another Japanese saying goes: "Money grows on the tree of patience."