Featured Articles

September 2006 -- One aspect of Japan's new Corporation Law seeks to strengthen corporate governance in Japan.  But to investors, how much does corporate governance matter?

To get an insider's perspective, JETRO spoke with Makoto Seta, Associate Director of Corporate Governance in Asia Pacific & Japan for Hermes Pensions Management Ltd. 

Hermes is wholly owned by British Telecom Pension Scheme, Britain's largest pension fund, and has a sizeable investment in Asia; Hermes has invested 3bn pounds in over 500 companies listed in the Tokyo Stock Exchange.

What is corporate governance?

Seta:  The managers of a company are entrusted by shareholders to run the company in the interest of shareholders.  Corporate governance is a system to ensure this, and a hallmark of good governance is operational and financial transparency and accountability.  Not all of these are mandated so it's up to the companies to make themselves understood by the market.  Of course these are predicated by how well companies can communicate with the market.

If a company is perceived to be performing poorly, one of the reasons might be bad communication with the market.  And that may have its roots in disclosure issues.

As a passive investor, we find that corporate governance is a very important part of ensuring that the value of our investment in a company is maintained.