Fuji Soft proxy fight the latest test of Japan Inc board independence
04/12/2022 05:37
By Makiko Yamazaki
TOKYO, Dec 4 (Reuters) - Singapore-based hedge fund 3D
Investment Partners is set to get some of its nominees on the
board of software developer Fuji Soft Inc 9749.T on Sunday, in
the latest proxy fight by activist investors seeking more
independent oversight of Japanese firms.
Three battles in recent months have questioned how
independent from management Japan's outside board members really
are after nearly a decade of governance reform has sharply
increased the number of independent directors.
Governance experts say outside directors are only nominally
independent if they have close ties to management or fail to
give proper oversight.
3D, which owns more than 20% of Fuji Soft, has nominated
four additional members for the company's nine-member board at
Sunday's extraordinary general meeting (EGM), saying existing
outside directors have failed to address years of inefficient
capital allocation.
Fuji Soft has endorsed two of the fund's candidates.
The Yokohama-based firm defended its current board, telling
Reuters in a statement that the independence of its outside
directors "has been ensured with no conflict of interests with
shareholders. They have given objective opinions and have
contributed to fostering active debate."
3D this year sought an EGM at Toshiba Corp 6502.T to
restart a strategic review of the conglomerate to explore
options including going private.
Hong Kong-based Oasis Management on Friday asked Fujitec Co
Ltd 6406.T to hold an EGM to remove all six incumbent outside
directors and appoint seven new ones nominated by the fund.
The elevator maker, just an hour before its June
shareholders meeting, withdrew a proposal to re-elect its chief
executive to the board following revelations of real estate
transactions involving his family. The board then appointed him
unelected chairman.
Oasis, which owns 16.5% of Fujitec, said the board had
"decided to egregiously breach shareholders' most basic right –
the right to vote and hold directors accountable," demonstrating
a complete lack of independent counterbalancing power.
Fujitec declined to comment, saying the company has not yet
confirmed the content of Oasis's EGM request.
HOW INDEPENDENT?
The Tokyo Stock Exchange says 92% of the roughly 1,800 firms
on its first section define at least one-third of their
directors as independent. But it is hard to gauge their
independence from management beyond a set of written criteria.
Governance experts say having a committee to nominate
directors would help ensure such independence, but only 3.9% of
the top-tier companies have a statutory nomination committee,
where a majority of its members must be outside directors.
Even such a committee may not ensure effective independence.
Tokyo-based Strategic Capital has sought an EGM at Japan
Securities Finance Co (JSF) 8511.T for an independent
investigation into the securities finance provider's long-held
practice of nominating former Bank of Japan, Finance Ministry
and Tokyo Stock Exchange officials to top management and
director positions.
The practice of senior government officials landing
post-retirement jobs in the private sector has long been
criticized as a source of corruption in the Japanese
bureaucracy.
JSF has a statutory nomination committee, but Strategic
Capital said its inaction over the troubled practice shows the
committee is dysfunctional.
The company has said the appointments have been made based
on the people's qualifications.
(Reporting by Makiko Yamazaki; Editing by William Mallard)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))