Discussion Results of the “Round Table Conference on Improving of Sustainable Corporate Value” Compiled as “Chair’s Interim Report”

1. Background and recognition of challenges

Since the publication of the Ito Review in 2014, various efforts have been made to improve corporate value, including the Guidance for Collaborative Value Creation, the Corporate Governance Code issued by the Tokyo Stock Exchange, and the publication of various types of guidance by various organizations.

Amidst this activity, some companies have made progress in reforming corporate governance and implementing management reforms, resulting in their corporate value has increased. At present, however, Japanese companies as a whole are still lagging behind companies in the United States and Europe in terms of performance indicators, such as ROE (return on equity) and PBR (price book-value ratio). Over the past decade, most Japanese companies, with a few notable exceptions, have failed to solve the challenges they face or improve their performance. What is the reason for this?

2. Purpose of the conference

The conference focuses on the challenges proposed and recommended in the Ito Review and confirms the progress made in the decade since its publication. On this basis, it focuses on the challenges for which efforts have been insufficient and analyzes the factors that have prevented the advancement of these efforts.

In light of this, the conference holds discussions on the directions of future responses in view of the changes in the environment since the publication of the review, while taking into account the fact of the complex interplay between these challenges and the factors affecting their success, ranging from corporate management, to boards of directors, to capital markets.

3. Overview of the interim report

Prior to the start of discussions at the conference, the chair of the conference presented eight challenges that were identified as critical (“Chair’s Memorandum”) and the members held a total of four discussions. The Chair’s Interim Report presents the following five challenges after reorganizing the original eight and incorporating the results of the discussions.

• To access the interim report, please visit this page

Challenges after reorganization	Issues identified by the conference
Challenge [i]: Gaps in recognition of corporate value between companies and investors	Reaffirm the importance of enhancing corporate value
Challenge [ii] Importance of management with a long-term perspective	Different priority issues and related solutions depending on the position of companies Enhancing future growth expectations (price earnings ratio or PER) through a long-term management perspective, while taking into account the principles of social sustainability (including appropriate approaches to corporate information disclosure) Review ideal approaches to mid-term management plans
Challenge [iii] Need for strengthening of management team systems	Strengthen CFO and FP&A function as well as CHROs and HRBPs Accelerate efforts to develop management talent
Challenge [iv]: Strengthen Board effectiveness	Clarify the role of the board of directors Strengthen the functions related to the appointment and removal of the top management Strengthening the effectiveness of non-executive directors (reviewing the selection process, enhancing dialogue and engagement with investors, and improving the quality of non-executive directors)
Challenge [iv]: Revitalize capital markets	Secure and foster asset managers as human resources who will lead the next generation Strengthen asset owners’ professional skills, including investment management skills Further reducing cross-shareholdings and optimize communication with the capital markets Improve the quality of information disclosure by companies Improve the operation of stock price indices to promote competition among companies

Related Links

• Round Table Conference on the Improvement of Sustainable Corporate Value
• Ito Review (published in August 2014)(PDF:1,341KB)
• Ito Review 2.0 (published in October 2017)(PDF:2,285KB)
• Ito Review 3.0 (published in August 2022)(PDF:3,762KB)
• Study Group on Dialogues Contributing to Long-Term Management and Long-Term Investment for the Creation of Sustainable Corporate Value (SX Study Group)

Division in Charge

Corporate Accounting, Disclosure and CSR Policy Office, Economic and Industrial Policy Bureau