Resolution of Social Issues While Realizing Ongoing Improvements in Corporate Value
Akio Mimura (Right)
Mr. Mimura has previously held positions as Representative Director and President and Representative Director and Chairman of Nippon Steel Corporation, and he is currently Honorary Chairman of Nippon Steel Corporation. Other major positions held by Mr. Mimura include Chairman of The Japan Chamber of Commerce and Industry and of The Tokyo Chamber of Commerce and Industry and Outside Director of Japan Post Holdings Co., Ltd. He assumed his current position as an Outside Director with Tokio Marine Group in June 2010.
Nana Otsuki (Left)
Outside Audit & Supervisory Board Member
Ms. Otsuki has held analyst positions at Standard & Poor’s Ratings Japan K.K.; Merrill Lynch Japan Securities Co., Ltd.; and various other financial institutions. Today, she is Chief Analyst of Monex, Inc. Ms. Otsuki also serves concurrently as a professor at the Graduate School of Division of Business Administration of Nagoya University of Commerce & Business. She assumed her current position as an Outside Audit & Supervisory Board Member with Tokio Marine Group in June 2018.
- QTokio Marine Group has continued to support customers and society in their times of need through its insurance business since its founding in 1879. The Group’s purpose of contributing to the resolution of social issues will not change going forward. As outside officers, what are your expectations of Tokio Marine Group and what do you see as the challenges it faces?
Tokio Marine Group as a Rare Entity That Naturally Contributes to Both Private and Public Interests
- Mr. Eiichi Shibusawa, who was instrumental in establishing the former Tokio Marine Insurance, states in his book, The Analects and the Abacus, that companies must excel at both pursuing profits (private interests) and exercising responsibility for the prosperity of society (public interests).
The best way for companies to contribute to the society is to solve social issues through their own business activities without sacrificing their profit, although traditional way has been to spare a part of corporate profits to the society through their CSR activities.
Shibusawa’s philosophy can be illustrated as "Japanese original version of the SDGs (United Nations Sustainable Development Goals)." The SDGs comprise seventeen goals. Frankly speaking, I don’t like the recent trend in which many companies just advocate the SDGs in general as a part of their public relations. More importantly, however, each company should pursue the resolution of specific social issues based on their intrinsic corporate philosophy. Such approach can make it sustainable for both companies and society to develop together in the long run.
Through its insurance business, Tokio Marine Group is contributing to the resolution of social issues pertaining to increasingly large natural disasters, automobile accidents, regional revitalization, and health and productivity management. These efforts have won the support of customers and society, enabling the Group to continue growing. I therefore believe that Tokio Marine Group is a rare entity being able to naturally realize both private and public interest at high level as advocated by Shibusawa.
- Everyone knows that Japan is plagued by natural disasters. Perhaps as a result of this environment, the Japanese people could be viewed as conservative pessimists when compared to others. In other words, a defining characteristic of the Japanese people is how they choose hard work as their means of overcoming uncertainty. Japan has overcome countless trials and changes—the Great Kanto Earthquake, its defeat in World War II, the motorization of society, the collapse of its bubble economy, and the Great East Japan Earthquake, to name a few. Looking back, it would seem as though Tokio Marine Group was always standing beside customers and society in the center of such turbulence, supporting them in their times of need to help them move forward. The Tokio Marine Group of today is a product of this history. As you stated, Mr. Mimura, the Group is an entity that has continued to naturally contribute to both private and public interests through its insurance business.
A "Good Company" to Whom?
- Tokio Marine Group refers to such an entity as a "Good Company." If the Company is to continue being a "Good Company" that resolves social issues while improving corporate value over the next century, it will be crucial for it to answer this question: A "Good Company" to whom?
No one can deny the principle of the capitalism that companies are doing business for their shareholders providing a capital for them. However, a company may have a diverse range of shareholders. If it tries to reflect the desires of all shareholders, its ongoing growth may be thrown into jeopardy.
Reflecting my own experience, when I had investors meeting as the president of Nippon Steel, a U.S. investor insisted that selling large quantities of standardized products be more cost effective, rather than customizing products based on the preferences of customers. This approach would have, no doubt, led to higher profits in the short term. However, we must not lose our focus on the long-term perspective that contributes to ongoing growth by, for example, enabling our engineers to heighten their development capabilities through the act of responding to customer preferences, which in turn enables us to predict future technological trends.
It is my wish that Tokio Marine Group will continue to provide value to all of its stakeholders, including its customers, society, employees, and shareholders, in order to realize ongoing growth while maximizing long-term shareholder value.
- Institutional investors operate businesses in which they are entrusted with pensions and other funds by their customers, and they are incentivized to increase those funds as quickly as possible.
I think that the concept of ESG investment was something that encouraged such investors to adopt a long-term perspective. ESG investment is an approach assuming that companies proactively addressing environmental or social issues or strengthening their corporate governance systems will see corporate value improve over the next five or ten years. This approach thus involves supporting companies’ efforts to resolve social issues from the funding side.
The ESG initiatives that Tokio Marine Group advances through its business activities have been highly evaluated by numerous global ESG rating institutions, earning the Group inclusion in several globally recognized ESG indices.
ESG investors and Tokio Marine Group share the common purpose of resolving social issues. These two parties are linked by the capital market, and this relationship could therefore be said to create a virtuous cycle of funding that contributes to the realization of a sustainable society.
- QTokio Marine Group utilizes superior talent and specialized expertise, including those incorporated through acquisitions. At the same time, the Group is focused on disseminating its core identity—"To Be a Good Company "—to unite its employees as a single team. How do you assess this aligned Group management approach as outside officers?
Smooth Progress in Only-in-Class Diversity Promotion Initiatives
- It goes without saying that promoting diversity is absolutely essential to the ongoing growth of global companies.
Tokio Marine Group commenced the full-fledged development of its international insurance business in 2008. Since then, non-Japanese employees have come to represent approximately 40% of the Group’s some 40,000 employees. At the same time, Tokio Marine Group employs an only-in-class aligned Group management approach. This approach includes appointing the presidents of newly joined companies to positions as important Group co-chief officers to apply their specialized expertise throughout the organization and otherwise utilizing superior talents and expertise on a global basis.
There are already numerous non-Japanese individuals and women in various decision-making positions throughout the Group. At meetings of the Board of Directors, officers with a diverse range of backgrounds engage in frank exchanges of opinion in a free and open atmosphere. I am not exaggerating when I say that sincere efforts are made to incorporate the input of outside officers. I hope that the Company will continue to emphasize these value and accelerates diversity promotion initiatives.
- Training for employees in Japan could be cited as one benefit of the aligned Group management approach. The number of overseas representatives is increasing. There is a need for communication with specialized personnel from overseas by the members of committees responsible for strategic discussion on topics such as enterprise risk management and overseas M&As. I think that arranging for such committees will also be a prime training opportunity for enabling the junior employees that support committee members to learn about global standards. Providing employees with a lot of opportunities to engage with foreign culture and ways of thinking in this manner will certainly prove invaluable to future global expansion.
Spectacular Initiative for Disseminating the Core Identity
- Overseas M&As are an area in which Tokio Marine Group has proven to be quite skillful, despite the large number of Japanese companies that have failed in this regard. The reason behind this difference itself is perhaps an important research theme. However, I already have an answer to this question. Tokio Marine Group’s success in M&As is a result of it using "culture fit" as one of the metrics based on which it makes acquisition decisions.
"Culture fit" as used by Tokio Marine Group refers to looking at whether an acquisition candidate truly values its customers and whether it is focused on sustainable growth, as opposed to short-term gains. These factors are positioned as important themes of discussion at Board of Directors’ meetings when making acquisition decisions.
Members of top management at overseas Group companies are well versed in insurance underwriting and asset management, and I understand that the Company has high expectations for their expertise. More important, however, is that these individuals understand the Group’s core identity of "To Be a Good Company" and are passionate about contributing to the Group as a whole.
Moreover, these individuals will no doubt be happy to have their experience and views validated. Having been a company president in the past, I know this all too well.
In other words, Tokio Marine Group’s post-merger integration process has embedded a mechanism in which companies embracing the same philosophy assimilate by sharing their expertise. To the Group M&As are not just a method of growing profits, diversifying risks, and gaining other financial benefits; there are opportunities to be fully digested by absorbing the expertise and corporate cultures of acquisitions and using these acquisitions to further human resource development.
I agree with you on that. One matter that warrants caution during the post-merger integration phase is the risk of deterioration in the relationship between the acquiring company and the acquired company. Tokio Marine Group is extremely adept at managing this risk.
This is likely a product of the assimilation mechanism that you spoke of, but one good example of this relationship building I can think of was when members of top management at overseas Group companies were invited to an in-house concert. The Group CEO introduced these managers to the attendees, and in this act I saw the spirit of highly considerate hospitableness that aids the assimilation process.
Also, when I visited a U.S. subsidiary of the Company, a program that was being conducted there as part of the training curriculum for management candidates had participants produce works of art that symbolized the concept of a "Good Company." This program was a spectacular initiative for disseminating the core identity that provided an opportunity for employees to think deeply about what exactly a "Good Company" is through art. The artworks produced in fiscal 2017 and fiscal 2018 were completely different. It is interesting to see how the trends in the United States in a given year influence the artworks.
Direct Link between Social Issue Resolution and Employee Motivation
Desire for Tokio Marine Group to Muster the Strength of the Employees That Deliver Value to Make Higher Level Contributions to Private and Public Interests
- In a survey answered by roughly 75% of the Group’s 40,000 employees, there was a question on the pride that employees felt for working for Tokio Marine Group. The responses of employees averaged 4.1 out of 5. I think that this high level of pride among employees is a result of their truly feeling that their work is contributing to society. I have no doubt that contributing to the resolution of social issues through business activities has a direct link to employee happiness.
- Japan was struck by several natural disasters in 2018. An aggregate total of 50,000 Tokio Marine Group employees from across Japan were mobilized to respond to these disasters by helping realize swift claims payments to customers. I have heard that a large number of these employees were those that volunteered to rush to the aid of the disaster victims.
Employees also volunteer to teach Disaster Risk Prevention Lessons at elementary schools across Japan, during which they offer concise explanations of the mechanisms behind earthquakes and tsunamis and how to prepare for such disasters. These lessons have been held more than 500 times to date, and the aggregate number of participants has climbed to 40,000.
These are just some examples of how Tokio Marine Group’s core identity of ＂To Be a Good Company＂ has permeated the activities of all employees. Through activities to further disseminate the core identity, I hope to see the Group further increase employee motivation to make higher level contributions to private and public interests.