【Research Report】The GR Scores 2019

Nikko Research Center, Inc. developed the Governance Research Scores (GR Scores) in 2016 to evaluate corporate governance in Japanese companies. The GR scores evaluate the corporate governance practices of the top 108 Japanese companies by benchmarking their practices against two standards: Japan’s Corporate Governance Code as the domestic standard, and the ICGN Global Governance Principles as the global one. This paper provides an overview of the GR Scores 2019 as they were at the end of 2018.
The average overall domestic score is 50.9%, 0.5 points lower than in the previous year. In comparison with previous years, the scores against the remuneration theme have improved. In particular, the introduction of performance-based pay for CEO and other executives and the establishment of the profit benchmark for their performance-based pay may increase higher scores.
By contrast, the average global score is 23.7%. The score is low in absolute terms, having increased only 1.6 points on average and 3.5 points at the median compared to the previous year. The bottom quantile has also scarcely improved. These scores will likely be polarized between the improvers and the laggards in terms of the global standard. Similar to the case of the domestic scores, the remuneration theme score improved from the previous year with the introduction of the long-term incentives policy, which includes restricted stock, the withhold clause, and the claw-back clause.