Activism & Voting this Week: Japan's whirlwind proxy season
Results are rolling in from Japan’s whirlwind proxy season. As of June 30, partial and primary-focus activists have won 3 of the 7 board seats sought at Japan-listed companies, down from 6 seats out of 17 sought in the same half year period in 2023, according to DMI’s Activism module.
While the number of board seats won looks disappointing, actual voting results from the 2024 proxy season on Diligent Market Intelligence’s (DMI) Voting platform illustrate the growing influence shareholder activists are having over both vote outcomes and share prices. That influence has risen to the point where many Japanese companies opposed to activist demands are adopting their proposals despite meeting outcomes. In some instances, companies may actually be courting activists.
Monex Asset Management didn't win any board seats at Dai Nippon Printing, but the reelection of company President Yoshinari Kitajima faced 25% opposition, twice the level seen in 2023. Dai Nippon also announced it would spend an additional 8.3 billion yen ($51 million) to buy back 8.3% of shares outstanding, helping the stock rally 60% over the last 12 months.
Oasis Management similarly didn't win any board seats at paper maker Hokuetsu, but its candidates and other proposals saw over 38% support. That tally, boosted by a major Japanese investor, is sure to keep management on its toes. Hokuetsu, meanwhile, pledged to cut its stake in peer Daio Paper, a long-standing relationship that Oasis has criticized. Hokuetsu’s stock is up 22% over the last 12 months.
Elsewhere, Black Clover’s demands for chemicals company Sankyo Kasei to scrap its takeover defenses and lift dividends garnered 43% backing, just shy of the 50% of votes needed. And at Toyo Securities, President Yoshiaki Kuwahara stepped down during the Japanese finance broker’s June 26 annual meeting, reportedly because a major domestic activist investor threatened to vote against his reappointment.
One of the biggest shots across the bow, however, was the 27.2% opposition to the reelection of Toyota Motor’s Chairman Akio Toyoda, up from 14.2% in 2023 and just 3.6% in 2022. Dissenting shareholders cited a lack of board independence and female directors.
Sources told DMI that if so-called “cross shareholding votes” held by Toyota subsidiaries were excluded, opposition toward Toyoda's election would have been closer to 60%. Nevertheless, Toyota’s stock is up 28% over the last 12 months, well ahead of peers General Motors and Ford.
Such gains have helped the Nikkei 225 gain 16% over the last 12 months, beating the Dow Jones and most other major markets. Japan is still considered undervalued, with roughly half its listed companies trading below book value.
These impressive gains have prompted a resurgence in big international activists targeting big Japanese companies. In the last month, Elliott Investment Management disclosed sizable stakes in Sumitomo and SoftBank Group, while Oasis last week called for a governance overhaul at Japanese drugstore chain Ain Holdings.
Activists may find the welcome warmer than in prior years.
Alicia Ogawa, project director at Columbia Business School’s Center on Japanese Economy and Business noted that “a growing minority” of Japanese companies are privately welcoming talks with bigger activists who spent time and resources researching their company, peers and industry, seeing it as a form of free consulting.
And, in some cases, activists are welcomed because they give Japanese management teams greater license to take painful steps like replacing directors or selling assets.
“You occasionally meet companies that want an activist on the register as a kind of Gaihatsu [external force],” noted Ogawa. “It's like everyone wants something to happen but they can't say so, so they ask the activist.”
