【Research Report】The GR Scores 2018

Nikko Research Center, Inc. has developed the Governance Research Scores (GR scores), which evaluate the strength of corporate governance in Japanese companies. We list the GR Scores of 100 major domestic companies by benchmarking their practices against Japan’s Corporate Governance Code as the domestic standard, and the ICGN Global Governance Principles as the global standard. Here, we report the GR Scores 2018 as of December 31, 2017 in sequential form.
The overall domestic average score rose 3.1 points to 51.6% from the previous year. Sixty-nine companies had higher domestic scores, and only eight companies had lower scores, compared with the previous year. Disclosing the result of board evaluations, conducting effective board meetings, and setting targets such as earnings in the medium-term management plan seemed to drive this improvement in scores.
The overall global average score also rose 1.4 points to 22.3% from the previous year; however, it remains low. While 63 companies had higher global scores, 25 companies had lower scores compared with the previous year. The main reasons for the rise include easing of the requirement of independence for controlled companies by ICGN in their revised principles and a certain number of companies adopting restricted stock for management compensation. By contrast, a tightening of the independence requirement for the audit committee lowered the global scores.