Japan’s upcoming 2023 AGM season marks a turning point in the country’s corporate market, as shareholders are becoming more vocal and assertive. This trend is driven by both the rise of shareholder activism and the growing demands for board diversity and ESG factors. Previously, Japanese companies relied on “loyal” shareholders to secure candidate support rates and avoid any potential company bankruptcies. However, the increasing pressures from stewardship obligations and independent board member requirements now challenge the traditional power balance in the market. As a result, many companies are implementing systemic changes in capital allocation, climate policy, and transparency to appease their shareholders.
As the 2023 AGM season approaches, Japanese companies’ top management and investor relations departments are inundated with fund managers’ meetings to avoid scoringless than 50%. They are also adopting new strategies to protect their bosses and trim the number of investor proposals presented. For instance, Seven & i Holdings presented extensively to investors in both Europe and the United States to fend off the sustained attack by US activist fund ValueAct Capital. Consequently, the ideal scenario is for the only threat to trigger improvements, leading to a better-governed firms market while maintaining balance.
Additional piece:
Japan’s Corporate Governance Changes in the Next Decade
Japanese companies’ reluctance to adopt modern corporate governance practices has been flagged for several decades now. However, the steady change in the 2023 AGM season and the growing pressures from investors and stakeholders will undoubtedly push this industry toward adoption and innovation finally.
Evolutions in the traditional market practices will stir accelerated action from investors, especially with growing pressure to rapidly reduce their carbon footprint and embrace ESG proposals by 2030. For instance, some companies are moving towards net-zero carbon emissions by 2050, while others are working on adding more female directors on their boards. These moves are aligning the country’s industries with global ESG principles and practices.
Adoption of modern corporate governance practices is also spurred with more attention beginning to shift to the younger generation of Japanese shareholders. Transparency in the market is crucial to these groups, more so with the COVID-19 pandemic causing significant economic crisis globally and threatening many companies’ investment plans. Japanese companies dealing with these investors must provide a clear game plan, where ROI and sustainability commitments are transparent and address the concerns of this new generation.
Additionally, there is the continued rise of shareholder activism in the country, with record numbers of activists and greater involvement of foreign fund managers entering the market. This will serve as a wake-up call for Japanese firms to up their game, invest more in their companies, and adopt modern corporate governance principles to keep them competitive.
Overall, the next decade will bring about significant changes to Japan’s corporate governance principles, with the influence of ESG principles, new shareholder generations, and evolving regulatory requirements. With the firms flexibly moving with this change, Japan’s market is sure to see a significant boost.
Summary:
Japan’s upcoming 2023 AGM season marks a significant shift in the country’s corporate market as shareholders become more vocal and assertive. Companies are adopting systemic changes in capital allocation, climate policy, and transparency amid growing demands for board diversity and ESG principles. As a result, they are inundated with fund managers’ meetings to avoid scoring less than 50%. A new generation of Japanese shareholders and growing pressures from investors and stakeholders is spurring Japanese companies toward adoption and innovation in modern corporate governance practices. This continued shift will surely give the Japanese market a massive boost in the next decade.
—————————————————-
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
Each year, the June corporate general meeting season in Japan is a reminder of the delicate balance in which the Tokyo market operates: Shareholders are granted immense disruptive powers, but have been reluctant to use them.
There have been many predictions that this balance may eventually crumble, although it has remained steadfast for a long time. But the 2023 AGM season, both companies’ investor and investor relations departments say, already looks like it will be different.
At the more visible end, there are more shareholder activists targeting Japanese companies than ever before, and many of them, like Elliott, have prominently expanded their Japan teams since 2022.
Mizuho Securities and others predict that the season will see Japanese companies confront a record number of shareholder proposals. Their approach is also changing: where previously they issued outspoken calls for share buybacks and quick asset sales, many are now pushing for systemic changes in capital allocation, climate policy and transparency.
But a more fundamental challenge is also mustering strength from the traditional end of wealth management. This is constrained by a growing list of rules-based mandates to hold companies accountable on the grounds of board diversity and ESG factors, and threatens to unleash at least some of that long-underutilized shareholder power on CEOs who do not manage to address their governance shortcomings.
Japan’s AGM season has always attracted attention, often for the wrong reasons. With such a large percentage of the country’s companies – 2,283 at the current count – ending their financial years at the end of March, June is an obvious time to hold shareholder meetings after full year reporting and the registration of the proposals are finished .
But this has been taken to an extreme. In the mid-1990s, 96% of companies held their general meetings on the same day in June. These days, given the growing need to appear shareholder-friendly, the season is a little more nuanced: just under 80 percent of companies hold seven-day meetings at the end of the month.
Behind that grouping is a technical fear. Japanese companies do not have, by convention, staggered boards and, in almost all of them, the shareholders are called upon to elect the directors, including the CEO as the representative director. In theory, given that any of these could be ousted by a support rate of less than 50%, this means that each year’s AGM comes with the theoretical threat of a company’s total bankruptcy.
For decades, this theoretical risk has been offset in ways that have allowed CEOs to rest easy. Friendly companies formed networks of “loyal” shareholders which, combined with docile investor bases, effectively ensured that support rates for candidates would land in the comfortable 85-95% zone.
But companies can now see that changing rapidly, as stewardship obligations force pension funds and life insurers to be less compliant, and old habits, such as having boards without a decent contingent of independent members, now create vulnerabilities. for managing directors.
Those companies whose financial years end in December have already held their annual meetings, and the struggles some have had with investors now stand as a wake-up call to the thousands of others who will be holding their meetings over the next four weeks. Fujio Mitarai, the CEO of Canon and a towering figure in corporate Japan, managed it with just 50.59% support. Major shareholders, including BlackRock, voted against Mitarai because Canon currently has no female directors and he was held accountable.
The top management of retailer Seven & i Holdings survived more comfortably, but only after a sustained attack by US activist fund ValueAct Capital and the company’s intense efforts to win over shareholders. Those efforts included extensive presentations to investors in Europe and the United States and set a precedent that others have followed.
Fund managers contacted by the Financial Times report an extraordinary flurry of meetings with investor relations departments and CFOs of Japanese companies who now feel threatened in the upcoming AGM season and are trying to protect their bosses from a score below 50%. The ideal situation, those fund managers add, is for only threat to trigger improvement: Japan’s equilibrium remains, but with better-governed firms on one side and less compliant investors on the other.
https://www.ft.com/content/1e05e8f2-83c6-4a7f-a28c-a9ca055604cf
—————————————————-