Closing the Gender Gap in Corporate Japan – The News Lens International Edition – The News Lens International Feedzy

 

Japan ranks 125th out of 146 countries in gender parity, with only 11.4% of board members in Japanese companies being women.

By Kumiko Nemoto

According to the 2023 World Economic Forum Global Gender Gap Report, Japan ranked 125th out of 146 countries in terms of gender parity — the lowest among G7 countries and in the East Asia and Pacific region.

Women accounted for only 11.4 per cent of board members in Japanese companies listed on the Tokyo Stock Exchange’s Prime Market in 2022, while in Western economies women make up around 30 per cent of board members. Women are also absent from middle management positions. A 2022 study of over 10,000 Japanese companies found that only about 9 per cent of their managers were women.

In addressing this problem, Japan has two different models to consult — the mandatory quota model and the model of investor pressure. Japan could follow the European Union’s approach by prioritising government-led social equality initiatives and adopting gender quotas. By 2026, the EU will require women to occupy 40 per cent of seats on the boards of large companies.

Alternatively, Japan could listen to foreign investors, who point out that board diversity improves business growth and financial performance. In the United States, despite an absence of formal quotas, female board member representation reached 33 per cent among the largest 100 companies in 2022.

Japanese Prime Minister Fumio Kishida has announced a goal of having women in 30 per cent of executive positions in prime-listed companies by 2030. The Japanese government has also announced that every prime-listed Japanese company should have at least one female executive by 2025. The Japan Business Federation — Japan’s largest economic and industrial group with over 1500 Japanese companies among its members — has also set a goal of increasing the proportion of women executives to 30 per cent by 2030.

But companies won’t face penalties for not reaching these goals. The Japan Business Federation contends that companies should strive for the goals voluntarily, and the Japanese government supports this approach. A diversity quota is unlikely to occur any time soon.

Foreign investors have played a crucial role in pressuring Japanese companies to increase the number of women on their boards. The number of female board members and female executives in prime-listed Japanese companies has increased from less than 3.6 per cent in 2016 to 11.4 per cent in 2022 — with a threefold increase between 2016-2022.

This change can be partially attributed to corporate governance reforms in Japan, which have promoted companies’ adoption of the U.S. shareholder-based system. Japanese businesses now incorporate foreign investors as vital stakeholders.

Major institutional investors and US proxy advisors have pressured Japanese companies to increase board diversity. State Street Global Advisors — known for its ‘Fearless Girl’ campaign — voted against 106 Japanese companies’ selection of board members between March of 2020 and February of 2021 for not having enough women on their boards. Goldman Sachs voted against the election of board members in about 400 companies with no female board members.

Their campaigns reminded Japan that a diverse board composition is now the global business norm and is essential for financial growth. Even so, the impact of foreign investors’ intervention will be limited in scope because only about 30 per cent of shares in Japanese companies are held by foreign investors, far less than the average of 70 per cent in US companies.

Should both the European Uunion and the U.S. approaches ultimately fail, Japanese companies must come up with their own plans for gender diversity, recognizing the uniqueness of the deeply ingrained gender imbalance in the Japanese business system.

One reason that it takes so long for Japanese companies to promote women to management positions is because of Japan’s rigid commitment to age-based promotion and pay in most industries. In this rigid hierarchy, it takes at least 15 years for an individual to get promoted to middle management and even longer to attain an executive position. Rewarding individuals for their performance and skills would be much more equitable and productive.

The recent government mandate to appoint at least one woman as a board member is far from a solution for closing the gender gap. In interviews with investor relations managers of large Japanese companies with at least one woman on their boards, two managers explained that top executives often choose outside directors based on how well they can advertise the company to the Japanese public.

Rather than considering their skills or qualifications, companies therefore often go for media figures and celebrities. They likely want to capitalize on fame or physical appearance to enhance the firm’s reputation. But this further reinforces the marginalisation of women.

Appointing qualified women to the boards of Japanese companies is critical. According to a study of gender-balanced committee meetings involving high-achieving professional women, these women covered a broader range of issues than their male counterparts. They also voiced more disagreement, leading the committee to engage in deeper discussions.

But the appointment of a small number of qualified women on boards is limited and may not be enough to make a real difference. Another study showed that despite companies’ compliance with quotas, they relegated female directors to handling less important committee tasks. Male executives dominated the most critical tasks of board management.

Conforming to the global norms of gender equality is certainly important, but beyond the addition of women, holding firms accountable and enhancing transparency about gender dynamics are both critical.

Kumiko Nemoto is Professor of Management in the School of Business Administration at Senshu University, Tokyo.

The News Lens has been authorized to republish this article from the East Asia Forum. East Asia Forum is a platform for analysis and research on politics, economics, business, law, security, international relations and society relevant to public policy, centered on the Asia Pacific region.

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