8/20/2019
Investors' New Weapon in Japan: Votes to Embarrass the Boss
Wall Street Journal (08/20/19) Bhattacharya, Suryatapa; Davis, River
In Japan, shareholders have become increasingly vocal amid a push to improve companies' profitability and corporate governance. While embarrassing bosses once was rare in Japan, shareholders are now using it as a new weapon, in some cases to get their nominees onto boards. Seth Fischer, founder and chief investment officer of Oasis Management Co., said the hedge fund was using Japan's stewardship code to push for change, noting that writing letters and meeting with senior managers at one company led to share buybacks, higher dividends, investment in new information technology, the removal of two directors, the addition of an external director that it nominated, and the retirement of the chairman. "Our general policy is that we will always try to work with management first," Fischer said. "In this case, we were not making progress initially, but as things continued privately, and we were on the verge of announcing a public campaign with proxies, the company went forward with our proposals." According to IR Japan, a record 355 listed companies saw at least one significant rebellion during this year's annual general meetings, meaning a result where at least 20% of votes were cast against the appointment of one or more directors or in favor of a shareholder proposal not endorsed by management. Satoshi Iwanaka of IR Japan's research unit said, "Behind the scenes, a lot of movement by various activists is going on." While progress has been slow, given that the corporate-governance and stewardship codes are voluntary, Third Point inked an early victory in 2016 in a battle over succession, which led to the resignation of Toshifumi Suzuki, chairman and CEO of 7-Eleven operator Seven & I Holdings (SVNDY). Iwanaka expects activists and shareholders to make themselves heard even more often going forward.
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