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Treat the roots, not just the symptoms

Japan has been lagging significantly on women’s empowerment compared to other countries. While this may need to evolve, we are skeptical about certain drastic positions on this topic, which we feel are not more suitable there than anywhere else.

Japan plans to set a new requirement for companies to be listed on the TSE’s Prime Market:  having a ratio of female board members in excess of 30% by 2030. Back in 2012, Abe-san had pledged to reach a 30% women representation at all management positions by 2020, but the deadline had to be postponed to 2030 because it proved unachievable. As recently as mid-2022, 18.7% of companies listed in the Prime section had no female board members at all, while only 2.2% met the 30% target.

In an effort to contribute to this evolution, one of the world’s largest sovereign funds (and, before it, many asset management companies) announced that they will start voting against the appointment of all-male boards at Japanese companies. While we fully support the objective (by the way, women actually outnumber men in our own portfolio management team), we are not sure that it will be served by such measures.

As was already discussed by many observers, quotas just fuel frustration and a sentiment of unfairness, if not an incentive for top managers to pick women who won’t bother them, just to “tick the box”. We don’t see why gender, ethnic or religious considerations have to prevail over actual competencies and, more importantly, local culture and people’s aspirations.

The truth is, Japan might not even be prepared for that, and the right structure should initially be put in place before female candidates can happily join boards, or take other high responsibilities, while still having children, as demographics are another challenge for the country. There is a cultural aspect that will take decades to evolve. Among the most famous women in Japan, the current mayor of Tokyo, Yuriko Koike, described it as a steel ceiling. In fact, Japanese companies often complain that they cannot find enough qualified female candidates from their own ranks to fill their board positions.

In our latest reporting documents, we were praising the increasing activism from foreign investors that finally hold Japanese executives responsible for their actions. We are happy if this results in pushing them to make the right strategic choices for their company, less so if it is just about encouraging a fake diversity to meet quotas. Surely, nobody wants the selection of proposed directors to become a “treasure hunt” to find the only black, Muslim, Japanese-speaking female candidate in the country!

ALF – July 12, 2023

 

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