Japan's Growing #MeToo Movement Should Put Firms on Notice

(Bloomberg Gadfly) -- Japan's #MeToo moment has arrived, and companies should take note.

The nation's top finance ministry official is stepping down following allegations he sexually harassed female journalists. Earlier this week, a prefecture-level official said he also planned to resign in an unrelated case involving payments to women, amidst Prime Minister Shinzo Abe's worsening woes as polls show rising dissatisfaction with him and his government. Earlier this year, the president of Osaka-based NH Foods Ltd. left after a junior executive made sexually explicit remarks in his presence.

Whether these officials and executives are going because the allegations are true or they don't have the wherewithal to fight them, isn't the point. Their departures mark a significant shift in a nation steeped in tradition, giving Japanese women a voice over powerful men.

But corporate culture is unlikely to change overnight. A recent government survey on perceptions of gender equality in Japan showed that more than 75 percent of respondents think men are still given preferential treatment.

Japan's Growing #MeToo Movement Should Put Firms on Notice

To Abe's credit, he has tried to get more women into the workforce and gender diversity on boards has been key to his economic revival plan.

But progress has been slow. While Japan has a target of having 10 percent female executives at listed companies by 2020, as of 2016, the figure stood at 3.4 percent. More than half of Japanese company boards have no women directors.

Some sectors have done better than others -- wholesale trade and food firms, for example, average around 8 percent female board members and have a higher percentage overall of women employees, according to Goldman Sachs Group Inc. Even so, globally, Japan ranks near the bottom.

There also isn't any hard and fast evidence that having more women on boards boosts financial performance, despite some studies claiming causality. Other research has shown mixed or extremely small correlations.

According to MSCI Inc., there is some evidence to show there's power in numbers, with three women on a board representing a "tipping point" in terms of influence, which is then reflected in both financial performance and the number of women in senior leadership. In Japan, MSCI found that even one female director corresponded to a higher percentage of women across the firm.

In Japan, Topix 500 companies with at least one female director trade on average at 20 times forward earnings, compared to firms with no female directors at 18 times. They also trade at around twice their book value versus 1.5 times for the rest. Clearly, this isn't a perfect science.

But here's the rub: In a world where socially responsible investing is gaining traction and the #MeToo movement has unseated dozens of executives, investors can't risk putting money in companies that don't even take the optics of gender diversity seriously. Firms that are proactive in this regard should see their value rise.

Japan's Growing #MeToo Movement Should Put Firms on Notice

Astellas Pharma Inc. is a good example. It's one of the top-ranked companies on the Topix 100 in terms of percentage of female board members and its market capitalization has risen 13 percent this year to 3.3 trillion yen ($31 billion).

In a corporate governance report released earlier this week, Astellas said about one-third of its board is female, while 40 percent of its audit and supervisory panels consist of women. Globally, just under half of its employees are women and it was recognized on a list of 100 firms that are supportive of working mothers. Astellas ranks among the top 10 Topix 100 companies in terms of return on equity.

With U.S. proxy advisory firm Glass Lewis & Co. now recommending that shareholders reject chairman or president appointments at companies that don't have any female directors, Japan Inc. should take note of the changes afoot.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story: Anjani Trivedi in Hong Kong at atrivedi39@bloomberg.net.

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