Takagi For many years, the construction industry had been lagged in investor relations and disclosure. You, President Kibe, are very interested in the voice of the stock market and have been actively engaging with shareholders for about 20 years. I would like to ask you to reiterate again why you have done so.
Kibe Since I was also in charge of Investor Relations, I had many opportunities to communicate directly with buy-side professionals, especially overseas. Company management tends to vector inward, such as their own logic and self-interest. Shareholders, on the other hand, have their expectations vectored outward in terms of disclosure, growth strategies with leverage effects, and so on.During that period, I came across a stark contrast and observed the gap between these two perspectives,.
Takagi In those days, Maeda Corporation was actively doing things that competitors were not doing, such as small meetings with institutional investors attended by the president and overseas visits to investors.
Kibe It is not an exaggeration to say that closing the gap between internal logic and external expectations would be the company's greatest cost and I believe that approach is important for the future of our company. At that time, bridging this gap through investor relations became my life's work.
Tsumuraya Are you approaching the ideal you had then?
Kibe We cannot do it all at once, but we are gradually bridging the gap. I believe that if we can carefully convey our message to investors and they understand our message correctly then if we can build a relationship based on our mutual trust, people’s motivation in our company will increase even more, and we will be able to resolve this issue eventually.
Tsumuraya Do you see the shareholders' view of your company changing as well?
Kibe I feel it has changed considerably since we transformed our business model toward a comprehensive infrastructure service company (*1), especially since INFRONEER was established. For example, in IR meetings with foreign investors visiting Japan, there are quite a few people who say, "Your company is the only construction company I have visited this time."
Takagi I'm sure you must be very happy to hear that.
Kibe I believe this is because more and more people understand our approach. What I would like to tell our employees and those outside the company who read this dialogue is that we will never manage the company for our own convenience. I hope the next management team will aim in the same direction. To that end, I focus on institutional design, but it is not enough to guarantee it. I think practicality is important. To ensure that management is not lying, minutes of board meetings and other meetings are shared with all employees. I believe that making management decisions in a fair and honest manner with integrity will bridge the gap I mentioned earlier.
Tsumuraya Do you have an ideal company or governance structure in your mind?
Kibe It may be out there, but I haven't found any. Governance varies from country to country, and there is no right answer to governance. However, I thought it would be interesting to see German-style community-based management like Bosch and Volkswagen applied. When the fraud at Volkswagen was discovered in the past, I had the opportunity to go to Germany for a week and went around for hearings about it. Then everyone said, "Institutional design and execution are two different things.“ Even under Volkswagen's institutional design, data falsification eventually occurred. I realized once again that institutional design alone, such as governance structure and mechanisms, is not sufficient to make the system work.
Takagi There is no right answer to governance, but now the president's worldview and management philosophy is very important more than anything else.I believe that INFRONEER's greatest strength is that we receive many tips through dialogue and engagement with the capital markets.When the company became a holding company, the top management first clearly communicated his belief that "the improvement of corporate value will lead to the increase of market capitalization over the medium to long term" and "the satisfaction of all stakeholders will be reflected in the market capitalization over the medium to long term," which is why it was so easy for all of us to understand.Whenever we need to select or decide, we can always go back to the question, "Is this something that will increase corporate value? With unshakable belief in place, I have no worries as an outside director.Personally, I think it is our important mission to leave this unshakable belief as an organizational asset to the next generation.
Tsumuraya That is the most important thing to think about now.How to pass it on as an invisible asset without degrading it.I know that there are very few Japanese companies where outside directors are talking about this point of view. I guess that means you have such confidence in the current system.
Takagi Yes, I agree. INFRONEER has confidence, or rather, very good invisible organizational assets, which I hope will be passed on to the next generation. One example is our discipline on price.I have been observing the construction industry for 30 years as an analyst, and I have been disappointed to see construction companies that repeatedly accept orders with extremely low prices, even though the generation has changed. As a result, all kinds of things, including the skill and passion of employees and craftsmen, were sold at a low price. It is very unfortunate to see their actions that caused distrust in society and customers. If a culture of" Low-priced orders are unacceptable without exception" firmly becomes a part of organizational assets, a virtuous cycle of the relationship among employees, subcontractors, customers (including end users), and the local community could be created. It was the same in the industry I used to work in, where discipline in our price was all that mattered. President Kibe was the first to cut into this industry-wide issue with the cost disclosure method (*2). Our company is moving on to the next step, but I strongly hope that the industry itself will change, if only a little.
Tsumuraya Why did you start the Kibe-log? You have been talking quite deeply on the subject.
Kibe I believe that in a broad sense, it is our social contribution activity to increase the number of people who share our philosophy and way of thinking by sending out a message of management outside of the company.I really don't want to publish my own blog... (laughs)As many people read it and ask questions, I feel it is helping people understand what we are trying to do.
Takagi I am often asked by people from other construction companies, "I read Kibe-log and tell me a little bit more about it.”
Tsumuraya From the outside director's point of view, is there progress in the kind of unity among the members of the Board of Directors?
Takagi To begin with, I feel that there was quite a sense of unity from the beginning because we had exciting tasks in front of us for outside directors such as the establishment of a holding company with a nominating committee, etc., for the first time in our industry and the enhancement of corporate value over the medium to long term.The Board of Directors has many of the same members from the Interim Nominating Committee prior to the establishment of the holding company. We have exchanged views in many meetings. After the establishment of the holding company, those people are assigned to each of the three committees (Nominating, Compensation, and Audit), and there are quite a few opportunities for everyone to meet face-to-face.I believe that active communication, including chit-chat, has been working positively. In addition to the regular meetings, the executive management team intentionally provides us with opportunities to be together, such as financial results study sessions and site tours. As a result, I feel that we understand each other very well, including personality and character.
Tsumuraya Don't you feel that the members are representing the interests of their respective operating companies?
Takagi Both inside and outside directors have a clear shared belief in increasing corporate value of the newly established company. So, I have never felt that way.
Kibe If three companies work together, we may be able to see a world that one company could not see. I believe that such a sense of excitement has sealed off ideas of their own interests. Therefore, there is an atmosphere of embarrassment when they state opinions that represent the interests of their own operating companies.
Tsumuraya It is ideal. Why is it possible?
Kibe In creating an institutional design, we had a thorough discussion about the significance of becoming a company with a nominating committee, etc., the ratio of outside directors, their required skills, and so on. Now that you mention it, I am reminded that the thorough discussion process must have worked well.
Tsumuraya It sounds like you are making steady progress.
Kibe I think everyone is satisfied with the progress as we have been trying to be a company that is copied, rather than copying others if we are going to do it anyway.
Tsumuraya It's true that there are some difficulties when it comes to calculating shareholder value and corporate value. Even so, I think it is important to show concrete figures as an expression of intent to improve them.You have described in your integrated report the reduction of the cost of capital and the improvement of ROIC. Could you please reiterate the significance and positioning of those?You may call it the level of seriousness.
Kibe We give these indicators, which are critical in the stock market, to promote shareholders' understanding of what we focus on. But essentially, through our KPIs, I hope shareholders will deepen their understanding that the growth of the company and the enhancement of corporate value are beneficial not only to the organization, but also to the future and growth of every employee, as well as to society.
Tsumuraya Yes, it sure is.Ideally, shareholders, the company, and employees could work together to increase corporate value.
Kibe When I was young, I focused on the job in front of me, thinking that corporate management was none of my business and that ROIC, P/L, and B/S were matters for management to think about. If I had more interest in such figures, I might have been a different person than I am now. Some employees have never heard of words and numbers such as KPI, ROE, ROA, etc., and it may be difficult for them to understand how they are connected to themselves. However, I never want them to think these numbers are just to raise the share price for shareholders.Rather, I would like all employees to understand the connection between these indicators and their job satisfaction, purpose in life, livelihood, their future, and to consider corporate value for their families, children, and grandchildren. I believe that such understanding will change the behavior of each individual and will certainly improve our corporate value.
Tsumuraya In the infrastructure and construction industry, constructing visible buildings, bridges, and roads tends to be an indicator of the value of existence. From now on, it would be wonderful if the corporate culture becomes one in which employees are satisfied and have confidence in themselves based on the percentage of ROIC they have increased.
Kibe I believe this is the true meaning of the existence of companies and individuals in society. In other words, it will ultimately lead us all to a sustainable society.
