Japanese companies are overdue for their own Olympic embarrassment. Former athlete Seiko Hashimoto has just replaced the game’s original president, Yoshiro Mori, after he publicly complained that women caused meetings to run long by talking too much. Such attitudes are common: Females represent just 13% of directors at larger listed companies. But the Tokyo Stock Exchange could change that with its plans to hold companies trading on its new “Prime Market” to higher standards.
The new board will act as a goad to drive governance upgrades in the Land of the Rising Sun. In addition to market capitalisation standards, members must honour the exchange’s code of corporate governance, which calls for the “active participation of women.” While the current guidelines don’t specify what this entails, the exchange has told would-be constituents to expect new and more demanding rules when the Prime Market launches next year.
Foreign funds, which have become major traders of Japanese equities, will add pressure. Last year, AllianceBernstein, Legal & General Investment Management and State Street Global Advisors declared that they would vote against all-male boards at Japan-listed companies. In theory, policymakers should applaud too, given supporting women at work is a part of the government’s post-pandemic action plan. Government measures sketched in December include encouraging the promotion of female talent, and making it easier for working mothers to employ nannies.
Unfortunately the scarcity of women in the lower managerial ranks means there are fewer qualified candidates for top jobs. Take the big banks: A quarter of Mitsubishi UFJ Financial managers were women as of March 2020, while Sumitomo and Mizuho Financial had 15.3% and 16% respectively, according to S&P Global Market Intelligence.
There are reasons to doubt the government’s commitment, too: The ruling Liberal Democratic Party, for all its woke rhetoric, still doesn’t allow women to speak at key meetings. The risk is that companies appoint token females to visible positions to check a box. That’s what seems to have happened at scandal-stricken Nissan Motor, where a former racing car driver and model was recruited as an independent director, and Fujitsu, which appointed an astronaut to the board: neither woman boasted significant experience in the corporate world. Even if the stock exchange pushes for faster progress, a top-down approach faces major challenges.