(Bloomberg) -- Japanese companies scrambling to recruit female external directors to meet diversity quotas are hitting a shortage of suitable candidates in a country that has long failed to train women for top corporate roles.
That’s a boon for firms that connect potential board members to companies, but data analyzed by Bloomberg this month shows progress on diversity is slow, while concerns are emerging over the experience level of newly minted directors and the lack of support provided for them.
“There are very few women — probably less than 100 — who actually have experience managing a listed company,” said Kyoko Yokota, CEO of Colabolabo, a firm that provides training and matching services for female executives.
The number of female directors among firms in the Tokyo Stock Exchange’s prime market will need to more than double in the next six years to meet the government target of having women make up 30% of board members at major firms by 2030. With almost no women managing to climb the corporate ladder to become internal directors, companies will have no choice but to recruit them from outside.
Along with the government and exchanges, foreign investors are pressuring firms on diversity, while some domestic investors, including Nomura Asset Management and Asset Management One are also voting against boards with few or no female board members.
Data compiled by Bloomberg showed that the percentage of women on Nikkei 225 firm boards rose slightly to 20.5% last quarter, compared with 34.5% among S&P 500 firms in the U.S. and equal to the level of the Hang Seng in Asia.
At Pasona Group, a human resources company that matches executives with companies seeking external directors, the number of successful matches involving women has jumped five-fold in the last three years. Japan Corporate Governance Network said more than 70% of the participants on its external director training program are women this year.
“There simply aren’t enough women,” said Chieko Matsuda a business administration professor at Tokyo Metropolitan University, adding that board diversity improves decision making.
As demand heats up, concerns are rising over a lack of management experience among the new board recruits, with a bigger gap between male and female board members in Japan compared to the US and UK, according to a Japan Research Institute report. Some experts have expressed concerns about whether board members are taking their responsibilities seriously.
“More people now view outside directorships as a cushy job, or a good part-time gig,” said Matsuda. “It’s a shame.”
The shortage of women means female outside directors are more than twice as likely as men to take on multiple directorships, according to another report by JRI released last month.
Around half of outside board members surveyed by Japan’s Economy Ministry said that they devoted less than 10 hours a month to their roles beyond attending board meetings. Takanori Aya, a senior manager at JRI said it’s unlikely these directors — male or female — are spending enough time to be effective in their roles.
“It’s time outside directors were properly involved in management and given appropriate compensation,” he said, adding current pay levels are too low.
The average outside director for Topix 500 firms makes ¥13.1 million ($86,185) a year, while those in the standard market earn an average of ¥3.6 million to ¥6 million, according to Aya.
Some firms also fail to provide enough support for their external directors, according to an Economy Ministry report. While many first-time outside directors say they feel they don’t measure up to expectations, only 57% of them have received any training from the firms they join, according to the report. Despite the teething problems, women have an important role to play on boards, according to Colabolabo’s Yokota.
“What’s wanted from female directors is a different perspective,” she said. “They’re needed to voice what may have gone unnoticed in the past.”
--With assistance from Hua Bu and Hiromi Horie.
©2024 Bloomberg L.P.
