Nomura has dominated Institutional Investor’s roster of Japan’s Top Corporate Access Providers every year since the ranking was introduced, in 2013, but this year it shares the winner’s circle with rival Mizuho Securities Group. Each firm earns a place in every one of the survey’s 25 industry sectors that produced publishable results.
However, when a rating of 4 is applied to each first-place position, 3 to each second-place position, and so on, Nomura is the undisputed champ, with a weighted score of 92 to Mizuho’s 63.
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In third place overall is Daiwa Securities Group, with 18 spots, followed closely by SMBC Nikko Securities, with 17. These are the only brokerages that earn double-digit totals in this year’s survey, which reflects the opinions of more than 410 investors at 231 institutions that collectively manage an estimated $786 billion in Japanese equities.
A total of 18 firms make the cut (plus an additional six that receive an honorable mention). Click on the Leaders link in the navigation table at right to view the top institutions. Data regarding ranked firms not appearing here are available from the Institutional Investor Research Group; for information please contact Esther Weisz at 212-224-3307 or eweisz@iiresearchgroup.com.
Over the past year companies in Japan have reached an unprecedented level of transparency. Prime Minister Shinzo Abe has simultaneously pushed for greater accountability from executives and heavier scrutiny from their shareholders as part of his multipronged approach to kick-starting the country’s sluggish economy.
Long criticized for blindly following corporate leadership, upwards of 100 Japanese money managers and asset owners agreed to become more actively involved in the companies in which they invest when they signed Japan’s stewardship code, “Principles for Responsible Institutional Investors,” in 2014. Last summer regulators unveiled “Japan’s Corporate Governance Code: Seeking Sustainable Corporate Growth and Increased Corporate Value Over the Mid- to Long-Term,” which requires those companies listed on the Tokyo Stock Exchange’s first and second sections — that is, large and medium-size enterprises — to have at least two independent directors on their boards.
“Both initiatives have been important changes and are having key and visible impacts on interactions between investors and companies,” reports Yohei Osade, Mizuho’s global head of pan-Asian equity research. “Investors are being more proactive in requesting change in line with both the wording and the spirit of the governance code.”
Shinji Wakizaka, head of client relations management at Nomura, says Japanese executives are keen to meet a broader range of investors than ever before. “In the past many Japanese companies focused on dialogues with long-only investors,” Wakizaka observes. “Nowadays, they are willing to meet other investors that they had not met before, such as hedge funds based outside Japan.”
Nomura has seen robust growth in the number of meeting requests it receives from investors, and its flagship Nomura Investment Forum in November shattered previous records for attendance from both money managers and corporates — some 2,100 global investors sat down with representatives of more than 300 companies in over 5,000 one-on-one and small-group meetings, up from 3,800 the previous year.
Although the level of access has changed, clients’ questions haven’t, according to Kazuki Kawashima, head of corporate access at Daiwa. “We still find investors focusing on business strategies, operating performance and long-term earnings prospects,” he notes. “Such a stance reiterates the main purpose of the stewardship code — facilitating mid- to long-term growth in corporate earnings.”
As of June roughly 92 percent of the companies listed on the first section of the Tokyo Stock Exchange had recruited outside directors, up 18 percentage points year over year, according to Tokyo-based Nikkei newspaper. Many market observers believe this change will not only help deter corruption but also compel executives to focus on improving profitability and increasing shareholder value.
“It’s about growing the pie — and we would all prosper from that,” observes Akitsugu Era, Tokyo head of the investment stewardship team, which handles proxy voting and company engagement, at U.S.-based asset management behemoth BlackRock.
He is impressed by how quickly companies have opened up since the codes launched.
“A couple of years ago, the speakers would’ve been the heads of investor relations, but now we’re seeing more board members reaching out and meeting us,” Era says. Five years ago his crew would only meet with about 50 companies a year — that number has since tripled, he reports. BlackRock arranges the majority of its meetings directly with the companies in which it invests, but from time to time the firm attends conferences, nondeal road shows and one-on-one meetings arranged by sell-siders, depending on the speakers and topics of discussion.
Last year Mizuho took Japanese corporates overseas on more than 250 nondeal road shows, while arranging nearly 8,000 one-on-one and small-group meetings with investors in Japan, Osade says. The Mizuho Investment Conference held in September brought over 2,200 investors to Tokyo to hear from more than 300 enterprises, he adds.
The tenth annual Daiwa Investment Conference in Tokyo, convened in late February and early March, was similarly successful, Kawashima affirms. The five-day event drew some 5,500 investors and 471 companies — 407 from Japan. “We believe the new corporate governance code will encourage companies to more earnestly interact with investors going forward,” he says.
Nomura’s Wakizaka projects that corporate leaders will rise to the challenge, and notes that many are keen to meet a broader range of investors than ever before. “In the past many Japanese companies focused on dialogues with long-only investors,” he notes. “Nowadays they are willing to meet other investors that they had not met before, such as hedge funds based outside Japan.”
Follow Jess Delaney on Twitter at @jdelaney_NYC.
