___________________________________________________________________________ 2013/PPWE/008 Agenda Item: 9 Looking at Companies Through the Empowerment of Women Purpose: Information Submitted by: Japan Third Policy Partnership on Women and the Economy Meeting Bali, Indonesia 7 September 2013 Looking at Companies through the “Empowerment of Women” For the third round of theme issues, we have selected companies under the theme of “Empowerment of Women,” teaming up with the Ministry of Economy, Trade and Industry(hereafter "METI”) , which has been pursuing policies to promote the utilization of female human resources in order to revitalize the Japanese economy. 1. About the theme There are high expectations that women will help revive the Japanese economy, which has been sluggish for so many years. Not only can women quantitatively add to the working population of Japan's rapidly aging society, but they are also expected to contribute from qualitative perspectives, meaning that empowered female human resources in important positions could help companies achieve and sustain competitive advantages in the future(*1). For the third round of our series of theme issues, we have chosen companies listed on TSE's First Section from each industrial sector, which provide environments supporting the long-term employment of women, and which energetically promote active performance of female human resources. 2. Empowerment of Women and Diversity Management Diversity management can be briefly defined as “a strategy of leveraging the diversity of human resources(*2).” It is generally accepted that, by enhancing diversity management, “ideas free from conventional thinking” can be generated in the workplace. Such an environment is thought to lead to innovations, such as the development of new products and services which meet diverse needs of the market. Diversity management is also thought to allow companies doing business globally to better adapt to various markets or better prepare for possible changes and risks. In addition, such management is expected to facilitate companies to secure competent human resources by expanding the scope and volume of the companies' human resources. In this way, diversity management is considered an effective strategy of corporate management to secure competitive advantage. Given the current state of underutilization of capable female human resources, which are greatly abundant in Japan, the empowerment of "women" will be a key test for Japanese companies pursuing diversity management,. *1 Reference: IMF Working Paper “Can Women Save Japan?” “Japan’s potential growth rate is steadily falling with the aging of its population. Raising female labor participation can help slow this trend. “ “If Japan were to raise its female labor participation ration to the level of the G7(excluding Italy and Japan), GDP per capita would be permanently higher by approximately 4%. Raising female labor Participation rages further –to the level of northern Europe- could increase GDP per capita by 8%.” *2 diversity of human resources 1 Diversity here means that of experience and career as well as gender, age, nationality, and physical handicap. 3. “Empowerment of Woman” from an Investor’s View Point. In Europe, board members diversity is regarded as a key factor for corporate governance.(*1) Particularly pension funds and other institutional investors are increasing Socially Responsible Investment (SRI) based upon company ratings which include consideration to how they address diversity management and other factors. Especially after the global financial crisis, there has been an increasing interest in SRI among investors as a methodology of reducing investment risks. There are research results indicating that companies with more female board directors or executive officers outperform others in management indices such as Return on Equity (*2). Some companies are making efforts to create a work-life balance environment for promoting active performance of their female workforces such as supporting both child-rearing and family care and providing systems that allow employees to work flexibly. There are reports that such companies show double productivity levels per employee compared to companies which take no measures to create such an environment(*3). These results are only examples. Companies which are actively seeking the empowerment of women and succeeding in their efforts can be also regarded as “companies with growth potential” because of their ability “to leverage their diverse human resources” or “to transform themselves to adapt to changes in the business environment.” *1 Source: European Commission Green Paper "The EU corporate governance framework“ *2 Source: "The Bottom Line : Corporate Performance and Women’s Representation on Boards," Catalyst, 2007 (Catalyst is a leading non-profit organization based in the US which focuses on women and business.) *3 Source: RIETI BBL Seminar(December 21, 2011 ) "Firms' Performance and its Relationship with Firms' Promotion of Female Human Resource Utilization and Employees' Work-Life Balance : Facts revealed from the analyses of RIETI's survey on firms.“ (YAMAGUCHI Kazuo (Visiting Fellow, RIETI / Hanna Holborn Grey Professor & Chair of the Department of Sociology, the University of Chicago) ) 2 The Significance of Females in Corporate Management Response to Diverse Enhancement of Risk Control Market Needs Capability (Governance) and ・ Product Development and Adaptability to Changes Marketing/Sales Strategies which (Flexibility) meet the needs of female consumers, who are main players “Companies with at least one female board in global markets member or executive officer can decrease insolvency risk by 20% due to a wider scope of capabilities,enhanced governance, etc.” * Women account for about 74% of decisions on household spending in (Findings based upon the research of 17,000 Japan, and about 64% globally. companies by Leeds University, Credit Management Research Centre in 2008) Diversity Management Human resource management for better corporate performance through full utilization of diverse human resources • A key strategy for global corporations Enhancing the empowerment of women is the first step to diversity management (a key test). Long-term and Stable Fund Raising through SRI (Socially Responsible Investment) • In Europe, pension funds are active in SRI, reflecting the policy of stakeholders, especially labor unions. After the global financial crisis, there has been an Securing excellent human increasing interest in SRI to reduce investment risks. • The share of diversity management in the criteria of resources SRI ratings is said to account for about 10%. <International Comparison of SRI Market Share> Europe 49% United States 11.2% Japan 0.2% (Source) Global Sustainable Investment Alliance “2012 Global Sustainable Investment Review 3 4. Scoring criteria for Measuring Empowerment of Women The scoring procedures for this third round of theme issues were undertaken by The Japan Research Institute, Limited (hereafter "JRI") which provides ESG (Environmental, Social, and Governance) research products and services on Japanese and other Asian companies. JRI scored companies from the perspective of promoting an active female workforce, based upon publicly available information disclosed by companies such as CSR reports. At the same time, JRI conducted detailed examination on information from domestic and international external entities such as media outlets and NGOs, to reflect the results in the scoring when it found negative factors in terms of promotion of active performance of female human resources. The matrix below shows the scoring framework. There are two viewpoints (1) career advancement for women, and (2) support for a work and family life balance. From these perspectives, companies are evaluated on the policies and commitments, the content of practices, and actual performance. • From the angle of “career advancement for women,” companies are scored in terms of i) policies and their details for support of active diverse human resources, ii) specific measures to support active performance of female workforces such as training programs, and iii) track record of women who have been promoted to managerial positions, or as executive officers/ board members. • From the angle of “support for a work and family life balance,” companies are scored in terms of i) setting of policies and their details regarding a work-life balance, ii) specific measures taken toward a work-life balance such as work-at-home systems, shortened work hours, flexible working hours system, support for return-to-work after childcare leave, and iv) track record of the utilization of childcare or family care leave system. The total score of each company is calculated by aggregating scores of each item. Scoring Framework Policies and Content of Actual commitments Practices performance Setting of policies/targets Specific measures to Track record of women who (1) Career advancement and their details for support active have been promoted to of women supporting active diverse performance of female managerial positions, human resources employees executive officers or board members Setting of Specific measures Track record of (2) Support for Work and policies/targets and taken toward work- utilization of childcare or Family Life Balance their details regarding life balance family care leave work-life balance systems 4 5. Issue Screening Process The issues were screened for companies listed on TSE First Section as follows.