Foreign Pressure Is Leading to More Women on Japan’s Boards

Pressure from foreign investors has spurred a serious move among Japanese companies to look for more female board members this year, according to a startup chief that helps firms do just that.

(Bloomberg) — Pressure from foreign investors has spurred a serious move among Japanese companies to look for more female board members this year, according to a startup chief that helps firms do just that.

Formerly Japan’s youngest female mayor when she was in her mid-thirties, Naomi Koshi is the CEO of OnBoard K.K., which specializes in training and connecting potential female board members to Japanese corporates. More companies, especially listed ones, are seeking her help this year because of their promise to foreign investors and peer pressure from others in the same industry, Koshi said. 

The scramble came after institutional investors including Norway’s $1.4 trillion pension fund, the world’s largest asset manager BlackRock and Goldman Sachs Asset Management set rules to vote against Japanese firms with few or no female board members. 

“Some chairmen and CEOs are very afraid,” said Koshi in an interview last week. As an example, she cited how votes for Canon Inc. CEO Fujio Mitarai dropped to 50.6% from 75.3% at the company’s March shareholder meeting, after proxy adviser Institutional Shareholder Services recommended a vote against Mitarai over the board’s lack of female directors. 

The government also disclosed plans earlier this year to press companies listed on the TSE Prime Market Index to raise the ratio of female executives to at least 30% by 2030, followed by the Tokyo Stock Exchange’s revised rules late July. Still, only 3.7% of Prime Market companies have reached that threshold, the Nikkei reported Sunday. 

Among different drivers, “investors are the most important because shareholders have the power to change the board,” Koshi said. Domestic institutional investors such as Nomura Asset Management and Daiwa Asset Management have also begun to introduce similar policies of advocating for board diversity, she added. 

The world’s third largest economy has sought to bring more women into the workforce to make up for its aging and shrinking population, but has long struggled to meet its targets on diversity in more positions of influence. It ranked 116 out of 146 countries in last year’s Global Gender Gap Report by the World Economic Forum, far below all of its Group of Seven peers.

The push from investors, the government and the TSE combined has led women to hold 39 more seats on top Japanese boards compared to the previous quarter, an increase to 17% from 15%, according to data compiled by Bloomberg. Yet, the number falls behind 40% for Stoxx Europe 600, 33% for S&P 500 firms in the US and 19% for companies on the Hang Seng Index in Hong Kong. 

Koshi’s desire to push for change has motivated her through her diverse career path. 

She started her first job in 2002 as a corporate lawyer at Nishimura & Asahi, the largest firm in Tokyo, and attended Harvard Law School in 2009. During her secondment to a US law firm, Koshi realized the dire situation of Japan’s gender inequality when her male American colleague said he would take paternity leave for a year.  

Koshi decided to run for mayor of her hometown Otsu, the capital of Shiga prefecture in 2012, as she hoped to enable women to continue working even after giving birth. She stepped down after eight years — two terms — after building over 50 nurseries for over 3,000 children.

However, Koshi realized during her term that women still face problems in companies. “Even with nurseries, they pick up their children late because of long hours,” Koshi said. “As a mayor, I cannot change the issue. But after I stepped down, I wanted to tackle the issues at companies.”

When asked why she founded a company in 2021 focused on addressing board diversity, the 48-year-old said the board has the power to decide. “Women on boards have the ability to change the whole company, they can fix the pay gap or the working style,” said Koshi, who also serves as an outside director for V-Cube Inc and Softbank Corp.. 

OnBoard is now among several firms in Japan that seek to advise and help firms to bring in more female board members, as demand increases. 

Despite barriers such as changing the mindset of younger women to take leadership roles, and the lack of pipeline candidates in sectors such as manufacturing, Koshi said she believes that gender diversity is critical in bringing different perspectives to change companies. 

“My goal is a state where women can choose what they want,” she said. 

Latest Numbers 

Women held 39 more seats on the boards of companies in the Nikkei 225 Index in the second quarter from the previous three-month period, according to data compiled by Bloomberg. The average number of female directors rose to 1.7 from 1.6, out of an average board size of 10.5.

  • The percentage of female directorships increased to 16.5% from 15%
    • That is below the 36.3% of women on boards of the S&P/ASX 200 in Australia, 33.3% of the S&P 500 in the U.S., 39.5% of the Stoxx 600 in Europe and 19.2% of the Hang Seng in Asia
  • 40 Nikkei 225 companies increased the number of women on their boards; the top companies by market capitalization were Shin-Etsu Chemical Co., Sumitomo Mitsui Financial Group Inc. and Recruit Holdings Co.
    • Shin-Etsu Chemical, Sumitomo Realty & Development Co. and Toray Industries Inc. no longer have all-male boards
  • Four companies reduced the number of female directors; the top companies by market capitalization were SoftBank Corp., Nissan Motor Co. and Mitsubishi Chemical Group Corp.
  • Nidec Corp. has the highest percentage of women on its board
  • The real estate sector led the net gain in female board members, with one woman added to the boards at Mitsui Fudosan Co. and Sumitomo Realty & Development Co.
  • Recruit Holdings Co., Japan Post Holdings Co. and Daiwa Securities Group Inc. surpassed 30% female board membership for the first time since at least January 2019. The number of Nikkei 225 companies above this key threshold rose to 14 in June from 15 the previous quarter
    • Seven companies, including Canon Inc., Suzuki Motor Corp. and Nexon Co., do not have any female board members
  • The Bloomberg Gender-Equality Index returned 4.3% in the second quarter, underperforming the MSCI World Index, which returned 7%

Nikkei 225 companies with the highest and lowest percentage of female board members:

The Bloomberg Gender-Equality Index is a modified capitalization-weighted index that tracks the financial performance of those companies committed to supporting gender equality through policy development, representation and transparency.

–With assistance from Ritsuko Ando.

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