A Study on the Application and Direction of Stricter Criteria for Global Advanced Enterprises

Abstract

The perception of investors regarding global advanced enterprises is undergoing a transformation. Generally, advanced enterprises are recognized as those that pursue exemplary management practices. However, criteria of defining advanced enterprises may vary depending on the perspectives of producers, consumers, and investors. For example, consumers may identify manufacturers of excellent products as advanced enterprises, while producers may view highly profitable companies as such. Likewise, investors may consider firms securing significant dividends as advanced enterprises. From an objective standpoint, however, investors are regarded as evaluating enterprises in more diverse perspectives. For investors, both the profits that a firm generates and its social contributions for sustainability are significant. Enhancing shareholders' values is another main concern of investors. The following are some of the primary criteria that investors consider when identifying advanced enterprises: 1. Enterprises focusing on social contribution. The term "CSP (Corporate Social Philosophy)" is often used to describe social contribution activities, but "CSR (Corporate Social Responsibility)" is also commonly associated with such initiatives. In a narrow sense, the CSP or CSR simply refers to an enterprise allocating a portion of its earnings and incomes to societal benefit. In a broad sense, it entails leveraging the enterprise's abilities, capabilities, and resources to address societal challenges and advance the public good. 2. ESG, "ESG" stands for Environmental, Social, and Governance. This term was first introduced in the 2004 UN Report. Recently, ESG has emerged as a new standard for investment. Using ESG factors in criteria of investment implies to make investment decisions based on non-financial performance indicators such as environmental protection, social responsibility, and corporate governance as well as the firm's financial outcome. 3. Increasing rate of female representation in management. At shareholders' meetings, investors limit reappointment by exercising their voting rights when the rate of women in management positions is insufficient. Consequently, enterprises have put forth effort to meet criteria of advanced enterprises. In particular, Japanese enterprises are increasing management positions for female workers to break from the existing male-centered system of business management and promote appointment of women in management roles. In consideration of the insufficiency of industrial workforce, this shift in human power allocation is viewed as a pivotal step in perspectives of gender equality or talent placement in the right position. Investors' indifference in this regard can delay corporate innovation, which in fact requires of continuous efforts ^[1].This study examines this recent issue: changes in corporate environments as investors tend to apply stricter criteria of advanced countries. As Japanese enterprises' criteria of voting rights become stricter recently, the rate of women in management positions is an important issue. Investors are expecting that moving beyond traditional practices and promoting new management innovations will lead to a general corporate advancement.