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Business

Some may buck corporate governance trend

TOKYO -- While the Japanese government pushes for corporate governance reform, companies are starting to find their own ways to engage with the market.

     Ahead of others, medical equipment maker Omron and fish specialty store operator Uoriki went against information disclosure and investor benefit programs, which are usually welcomed by markets. 

Longer-term values

Omron has decided to stop announcing its interim earnings forecasts, starting for the year ending March 2016. Questions from securities analysts tend to be focused on whether the company's next quarterly earnings will be higher or lower than expected by the company. Omron explained that it lost opportunities to discuss corporate management from a medium- and long-term perspective.

     President and CEO Yoshihito Yamada said that market players could continue guessing the numbers.

     The Kyoto-based company has long had a good reputation in terms of investor relations. In the past, the company temporarily released its quarterly earnings forecasts as well. Satoshi Ando, managing executive officer and senior general manager of the company's investor relations, said that the company will reduce the amount of short-term information it discloses. Instead, he added, the company will disclose more information necessary for midium- and long-term investments. According to Ando, this is the antithesis to short-termism, and the company will make efforts to select its investors.

     In its annual and midterm plans, Omron provides information on its sales targets, the rate of return on invested capital and earnings per share, among other data. The company also has more than 1,000 opportunities a year for dialogue with institutional investors. Although the company does not offer interim analysis, it intends to disclose the information if its actual earnings could fall below or rise above its forecast for the full fiscal year by 10% or more, which is tougher than the 30% in the listing rules.

Fair gains

Announced on July 31, Uoriki scraped its shareholder benefit program. It received 50 phone calls from shareholders after announcing the decision. On the same day, the company also said that it has decided to increase its annual dividend and to spend up to 450 million yen ($3.59 million) to buy back its own shares. The figure is well above the total cost of 70 million yen for its shareholder benefit program. However, on the next trading day, the company's share price dropped 13%.

     Since it went public in 1998, Uoriki has been striving to increase the number of retail investors and send its stock higher. Under its investor benefit program, the company offered shareholders seafood, such as herring roe and salmon. The program had always been popular among small investors, keeping it in a high place on the investor benefit program ranking. Under the program, Uoriki sent 3,000 yen worth of gift to investors holding more than 100 shares in the company, providing good shareholder returns of 1% to 2%.

     That said, shareholder returns from such programs differ depending on investors' stakes. In addition, many institutional investors do not like the gift-giving approach. Then there is Japan's corporate governance code, which states, "Companies should secure effective equal treatment of shareholders." Uoriki thus considered it necessary to discontinue the program.

     President Masaaki Nakada said he wants institutional investors to hold shares in the company a little more, like retail investors, on hopes for the company's target total return ratio of 80%, which is higher than many other companies. In March, Uoriki switched its listing from the second section to the first section on the Tokyo Stock Exchange, aiming to broaden its shareholder base.

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