[Dongeul Dongeul] "Ajeossi Companies Are Ignored"... Japan's Women-Friendly Companies Also Show Better Performance

Correlation Between Female Executive Ratios and Corporate Performance
Stock Trends of 50 Women-Active Companies
Outpacing TOPIX Index Gains
Talent Acquisition as Key Competitiveness Amid Labor Shortage

Recently, with the surge in ESG (Environmental, Social, and Governance) management, there has been a strong push to increase the number of female executives within South Korea's business circles. The prevailing view is that to improve governance for sustainable management, organizations must first be composed of diverse genders.

This trend is followed not only domestically but also by global companies. In 2020, Goldman Sachs declared that it would not underwrite IPOs for companies whose boards consisted solely of white men.

Some readers may wonder how much gender diversity actually impacts corporate performance. Today, we will explore this correlation based on the example of Japan, which is also making significant efforts to increase the proportion of female executives.

Japanese Government Demands 30% Increase in Female Executives

Since establishing the Gender Equality Bureau in 2015, the Japanese government has been working to increase women's participation in economic activities. The Kishida Fumio Cabinet, in June last month, demanded that listed companies raise the proportion of female executives to over 30% by 2030.

Japanese Prime Minister Fumio Kishida
[Photo by Yonhap News]

The Japanese government's continuous efforts have yielded significant results. In 2013, 84% of listed companies had no female executives, but by 2021, that figure had dropped dramatically to 33.4%. However, there is still a long way to go. Only 2.2% of listed companies meet the government's 30% female executive target.

The Kishida Cabinet emphasizes increasing the proportion of female executives for the country's economic growth, noting that overseas asset management firms incorporate executive gender diversity into their investment policies.

Companies with Active Female Participation Outperform TOPIX Index Growth... Operating Profits Also Significantly Increased

Following the government's directive, JP Morgan, the largest investment bank in the United States, released an intriguing study. The research focused on the relationship between female-friendly management and the stock prices of listed companies.

A man is walking past an electronic board displaying the Nikkei 225 index of Japan. [AP = Yonhap News]

JP Morgan classified 50 companies with a high proportion of female executives as "female-active companies." They analyzed the stock price trends of these companies alongside the TOPIX index, which consists of Japan's leading listed companies. Both the TOPIX index and the stock prices of female-active companies hit their lowest points simultaneously in March 2020 due to the impact of COVID-19. Since then, they have entered a rising phase, with the stock price increase of female-active companies surpassing the upward trend of the TOPIX index by 2023.

Among individual companies, the stock price increase of female-active companies was particularly notable. A prime example is JAC Recruitment, a talent acquisition company. As of the end of last month, its stock price had soared by 121% compared to March 2020. Operating profits increased by 204%.

JAC Recruitment attributes its high performance to policies that increased the proportion of female executives through female-friendly initiatives. Chairman Tasaki Hiromi emphasized, "Boards with high uniformity (in terms of gender) cannot grasp management challenges from multiple perspectives."

JAC Recruitment recognized that many female employees left the company in their mid-20s due to childbirth, causing significant talent loss. Subsequently, the company established an in-house daycare center and began supporting childcare expenses, raising the return rate from parental leave to 100%. Since last year, they have also launched a project to select female leader candidates.

Members, a digital marketing company, is another case that overcame crisis through female-friendly management. Members was known as a "black company" that assigned employees returning from parental leave to the general affairs department or forced overtime. However, after posting its largest deficit in 2008, the company overhauled its HR system. They limited monthly overtime to 15 hours and allowed employees returning from parental leave to return to their original departments. The proportion of female executives also increased to 32%. Since then, Members' stock price has risen 62% from March 2020 to the end of last month.

Additionally, AI development company Future and wire manufacturing company SWCC (formerly Showa Wire Holdings), with female executive ratios of 33% and 29% respectively, also saw their stock prices surge sharply compared to 2020. SWCC's stock price rose 133%, and Future's increased by 189%.

Labor Shortage Society... Talent Acquisition Directly Linked to Corporate Competitiveness

So why do companies with a high proportion of female executives also perform well? Experts emphasize that in a society facing labor shortages due to low birth rates and aging, how many talents a company can secure determines its competitiveness. If women leave due to disadvantages after returning from parental leave, the company loses the talent it invested in training. Without acquiring excellent talent, corporate performance deteriorates, significantly reducing investment attractiveness.

[Image source=Yonhap News]

Yuki Shingu, director of Future, raised his voice, saying, "Male-centered so-called 'old boys' companies will be shunned in the market," urging companies to embrace change.

Today, we shared an interesting story about female-friendly management and corporate performance. As ESG becomes a key topic in management, we hope more companies will pay attention to diversity issues in the future.