Japanese firms field record proposals from activists at this year's shareholder meetings
FILE PHOTO: A man walks in an office building in Tokyo, Japan, May 7,2020.REUTERS/Kim Kyung-Hoon/File Photo
TOKYO, June 8 : Activist investors have made a record number of proposals to Japanese firms for shareholders to vote on at annual general meetings this month, including growing calls for company executives to step down.
Fuelling the boom has been multi-year prodding of Japanese companies by regulators and the Tokyo Stock Exchange to improve shareholder returns and invest in growth, as well as some recent big activist wins.
As of June 3, 139 proposals by activist shareholders were submitted for votes at AGMs, two more than last year, according to data compiled by Mitsubishi UFJ Trust Bank. The majority were submitted by foreign investors.
Of these, 19 either oppose a company-nominated director's appointment or nominate a new director candidate. That's up from 14 such proposals last year and just seven in 2024.
It's not easy for shareholder proposals to pass in any region, though they often pressure companies to reform. In Japan, fewer than one in 20 submitted since January 2023 have passed, data compiled by shareholder advisory firm SquareWell Partners shows.
That said, activist ambitions have grown after a vote instigated by Oasis Management last year ousted the CEO of chemicals firm Taiyo Holdings - a rarely accomplished feat.
High-profile campaigns by other activists, even if conducted by other means, have also provided an important boost. Of particular note was U.S.-based Elliott Investment Management's milestone victory over Toyota against the terms of a buyout of a group firm - a campaign it waged through vocal public opposition.
KYOCERA VOTE IN FOCUS
Of the many proposals put forward by activist investors, a June 25 shareholder vote at Kyoto-based electronics manufacturer Kyocera is expected to be among those garnering attention.
Oasis, which has previously argued that Kyocera should divest unprofitable businesses and accelerate restructuring, is now calling for Chairman Goro Yamaguchi to step down.
"Taiyo was the same situation (as Kyocera) where the CEO was allocating capital toward and heralding a poor business that was taking away from the good margins of the great business," said Seth Fischer, chief investment officer at Oasis.
Yamaguchi, who has led Kyocera since 2017, gained 63.8 per cent of shareholder votes last year - very low for a Japanese business leader and a far cry from the 79 per cent he had in 2021.
Kyocera's board has rejected Oasis' proposals, highlighting Yamaguchi's contributions to governance and management reforms.
Oasis is also calling for shareholders to vote against the heads of publisher and gaming company Kadokawa, Tokyo Steel and recruitment firm SMS. Kadokawa and SMS' boards rejected Oasis' proposals, while Tokyo Steel has yet to publicly respond.
"Right now, one effective way that we can galvanise other investors and improve the companies is to hold management accountable for poor performance if they don't deserve to be voted back in," Fischer said.
DOMESTIC ASSET MANAGERS ALSO HELPING
Other funds vocal this year include entities affiliated with Dalton Investments. They have in several cases proposed the appointment of independent directors with capital markets experience that they argue is lacking on the firms' boards, such as at probiotic drink maker Yakult.
UK-based AVI has called for the president of tablet manufacturer Wacom to step down, citing governance concerns and declining profits.
Yakult's board has rejected the Dalton proposal. Wacom's board has also rejected the proposed dismissal of its president but it has suspended its relationship with another company set up by the president after AVI's campaigning.
Domestic asset managers are also now taking a harder line on firms' capital allocation decisions and profit performances, lifting chances that they will vote against company leaders.
In particular, they tend to vote against management when there has been low return on equity or there are excessive cross shareholdings, the MUFJ Trust Bank data showed.
"Domestic managers feel more comfortable voting against a director's reelection if they feel something's wrong," said Ali Saribas, partner at SquareWell Partners.
