Japan’s use of the stock market to change companies’ attitudes to women is showing signs of working. As an investment strategy, it’s been less of a success.
Forty businesses were chosen as Nadeshiko stocks in March, the third annual selection of companies that encourage women’s advancement. The list is the brainchild of the trade ministry and the Tokyo bourse, which named it after a pink flower they say symbolizes female strength. It’s also the nickname of Japan’s World Cup-winning women’s soccer team. While more companies are taking steps to make the cut, the chosen ones in the first year only just beat the benchmark Topix index, while the second group have lagged behind.
The list combines two strategies of Prime Minister Shinzo Abe -- seeking a greater role for women in society and using equity-market incentives to change companies’ behavior. Japan ranks behind Liberia, Iran and Kuwait when it comes to promoting women to management positions, according to a report by the International Labour Organization in January.
“We can’t force companies to empower women,” said Takumi Matsuo, head of research in the corporate strategy group at Japan Exchange Group Inc., the bourse operator. “But through the Nadeshiko program, we can put pressure on them to disclose more information about the subject.”
All the 1,857 companies on the first section of the Tokyo bourse are eligible, according to the trade ministry, which aims to pick at least one from each of the Topix’s 33 industry groups. Businesses that don’t publish data on women’s career advancement are culled in the first stage of selection, with the field then narrowed to about 100-150 companies using criteria such as numbers of female managers. Those whose three-year return on equity is lower than the industry average are then ruled out, and of those left, the ones with the highest scores are named Nadeshiko stocks.
Companies that empower women have better growth potential because of their ability to adapt to changes in the business environment, the Tokyo bourse and the trade ministry wrote in a report on the program in March. Some research suggests companies with more female directors deliver better stock returns, according to the report.
Listed companies that break down manager numbers by gender soared from 185 in Nadeshiko’s first year to 571 currently, according to data from the exchange.
“One of the biggest points of the program was to encourage information disclosure,” said Hiroko Nomura, a Tokyo-based professor of humanities at Shukutoku University who specializes in gender issues. “In that sense it’s working.”
Using stock market incentives as a way to empower women is a rare phenomenon among developed economies, according to Yoshiko Takayama, a managing director at investor-relations firm J-Eurus IR Co. Japan has reason to do so: it ranks 96th out of 108 countries for promoting women to management positions, according to the ILO report.
Japanese offices have tended to be male-dominated monocultures where having a different opinion “makes you a target for criticism,” said Toshiyuki Shiga, vice chairman of Nissan Motor Co., in a panel discussion after this year’s Nadeshiko stocks were announced on March 18.
Nissan, picked for the list since the first year, has the highest share of women in management positions among Japanese carmakers, according to data compiled by Bloomberg. And yet, just 7 percent of its managers in Japan were women as of April 2014, said the company, which has plans to increase that to 10 percent by 2017.
For Miyuki Ohgami, a senior strategist at Mizuho Securities Co. in Tokyo, this year’s list includes one company she didn’t expect: Sumitomo Metal Mining Co., a copper and zinc miner that traces its roots back to the 16th century.
It’s surprising because mining is seen as a man’s game, says Ohgami. “I guess you can’t just assume companies making products for women will be chosen.”
Shiseido Co. didn’t make it this year, despite women making up 27 percent of its managers as of March 2014, according to data compiled by Bloomberg. The cosmetics maker had negative ROE in the year through March 2013, the data show.
Investors in the Nadeshiko stocks haven’t seen much difference in their performance compared with the broader market. While total returns of the 17 companies chosen in February 2013 beat the Topix by 2.1 percentage points from April of that year through the end of 2014, last year’s batch of 26 stocks underperformed the measure by 0.3 percentage point, according to calculations by Daiwa Securities Group Inc.
“Empowering women won’t magically make shares rise,” said Matsuo from JPX. He says he expects the Nadeshiko stocks to return more than the benchmark over a longer period.
For Shukutoku University’s Nomura, it’s not about share prices anyway.
“Nadeshiko stocks are a tool to speed up change,” she says. “If we just leave change to happen in its own time, we don’t know how many decades it would take.”