Ten years ago, IR in Japan was practically non-existent. Listed companies followed time-honored disclosure traditions in which they gave precious little meaningful information to the public. Most companies released their annual reports on the same day – thus burying their financial data in the crowd – and they used the media almost exclusively to disseminate news. But then again, ten years ago the Japanese economy was much more bullish than it is today.
In 1993 the Japan Investor Relations Association (Jira) was born. It began slowly with membership growing incrementally in the first few years, though recently its ranks have swelled dramatically. So dramatically, in fact, that its membership has now surpassed some of the older, more established European IR societies. ‘As of February our membership has reached 471, and in the last couple of years we have had around 100 new members a year,’ estimates Yoshiko Sato, Jira’s senior research fellow. ‘I think that reflects the high interest from Japanese corporations regarding IR.’
Sato attributes the increase in Jira’s membership to a widespread change in corporate philosophy. Pioneered by a few key member companies including Hitachi, Honda and Sony, Japanese top managements have come to regard IR as an important corporate function, and one that can help them navigate the volatile market conditions.
But Sato admits the main reason for increased investor relations is the Japanese economy itself. ‘In the old days big Japanese corporations didn’t have to care about efficiency of capital because main banks provided capital continuously. But from 1997 when Big Bang started, financial institutions had to develop their efficiencies, and that has caused cross-shareholdings to disappear [see Unwinding Japan Inc]. So Japanese corporations now have to find other shareholders.’
History
Jira was set up under the chairmanship of Katsuhiro Utada, who continues in this role to this day. Utada is also a member of the International Investor Relations Federation’s board of directors, and Sato stands in as his alternate. The Association’s original goals, generally and simply, were to build the investor relations practice in Japan, though Sato claims its activities have become more specified in recent years. For instance, Jira holds monthly seminars for its members. ‘Member companies get together to discuss their concerns, like how they should hold investor meetings, how many minutes should management give presentations, and so on.’ It also publishes a monthly newsletter, conducts an annual survey regarding the state of IR in Japan, and has a study committee to compile guidelines for IR best practice.
True to the Japanese reverence for harmony, this study committee began by consulting Jira members to establish areas of research. It outlined nine important items:
– Disclosure of material information
– Coping with financial media
– Relations with rating companies
– Fair and full disclosure
– Promptness of disclosure
– Timing of disclosure
– Shareholder lawsuits
– Forward-looking statements
– Internal structure to manage information
-Sato discusses Jira’s study of the US Securities and Exchange Commission’s Regulation Fair Disclosure. ‘We recognized that our awareness of these issues coincided with that of the SEC,’ she proclaims. Sato says the committee is compiling guidelines for these topics, similar to the National Investor Relations Institute’s own Standards of Practice for Investor Relations guidebook.
Jira’s annual meeting takes place each year in April or May and its annual conference, which draws more than 400 attendees, is held in December. ‘Recently, especially last year, most of the members were interested in Reg FD because their IR activities are internationalized now. They care about foreign investors and fair disclosure to Japanese individual investors.’
As Japanese cross-shareholdings unwind and companies face the prospect of finding new shareholders, Japanese retail investors have suddenly become a very important audience. In tandem, Japanese companies, which have grown up in an isolationist tradition, are now having to court international investors en masse. They are facing new foreign audiences with ever higher expectations, and this is raising the bar for accountability. ‘Shareholders want more information so companies want to give more information,’ Sato summarizes.
For more information about the Japan Investor Relations Association, visit it on the web at jira.or.jp (currently in Japanese only) or call: 3-5259-2676.
