Un­fin­ished busi­ness in Ja­pan

The Pak Banker - - OPINION - Bar­bara Judge

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."

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