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How 'ESG' is the boss? Japan Inc. to include social responsibility in bonuses

Shiseido, Omron want to show investors that executives care

Commuters crowd the streets in Marunouchi, Tokyo's central business district.

TOKYO -- A growing number of Japanese firms are rethinking how they compensate their top executives. In addition to the usual focus on financial performance, companies are keen to look at other factors that investors care about, such as environmental and social responsibility.

In investing, the term "environmental, social and governance" (ESG) refers to standards that socially conscious investors use to screen investments. Environmental factors are how a company treats the natural environment. Social criteria are a company's relationships with employees, suppliers, customers and communities. Governance is about the company's leadership, executive pay, internal practices and shareholders' rights.

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