GovernanceMetrics
International
FOR IMMEDIATE RELEASE: |
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GMI LAUNCHES JAPANESE CORPORATE GOVERNANCE
RATINGS
Only 3% of directors are independent and
almost one-third of companies
have cross shareholdings
New York, May 27, 2003 GovernanceMetrics International(GMI), an independent corporate governance ratings agency today announced ratings of the constituent companies of Japan’s Nikkei 225 index. This is the first international release by GMI and will be followed by ratings of Australia and European companies in the next few weeks.
GMI rates companies on a scale from one to ten. Of the Nikkei companies, three received the highest rating of 10, which GMI describes as “well above average” in their governance policies and practices. These companies were Japan Tobacco, Sony and UFJ Holdings, a financial services holding company.
Gavin Anderson, GMI’s Chief Executive Officer said “we score companies relative to each other; they are not scored against some theoretical gold standard. It is important therefore to note that while a company may score a 10, it should not be taken to mean that it is perfect, but rather that its governance is better than others in the same universe.”
Although there is some evidence of improvement, overall corporate governance standards are weak in Japan compared to the United States and the United Kingdom, according to GMI. Only one company included in the Nikkei 225 index has a board with a majority of independent directors. Indeed, out of a total of 3,445 directors at Nikkei 225 companies, only 111, or 3%, can be classified as independent. Board size tends to be large in Japan, with 38% of index companies having 16 or more directors and one company listing an astonishing 58. Additionally, nearly two-thirds of directors at Nikkei 225 companies have served for more than 15 years at the same company.
Despite recent sell-offs, many large Japanese companies retain close ties to “keiretsu” partners (a keiretsu is a network of affiliated companies), with almost one-third of the companies in the index reporting cross-shareholdings, while 20% have a core shareholder.
GMI conducted its Japanese rating project in collaboration with PacificData Co., Ltd., a leading Tokyo-based provider of financial information products and services. GMI offers a web-based subscription service and its ratings are used by institutions with a combined $2 trillion in assets under management.
GMI is the only independent corporate governance ratings agency focusing on corporate accountability issues on a global scale. Its ratings are based on 600 data points per company and cover seven broad categories of analysis. Ratings criteria are based on a number of well-regarded global corporate governance codes, including those developed by the Organisation for Economic Cooperation and Development (OECD).