Japan asset managers back corporate governance push, Oasis founder says

Kao

04/07/2024 08:09

By Scott Murdoch and Anton Bridge
       SYDNEY/TOKYO, July 4 (Reuters) - Japanese asset managers
are increasingly supporting the targeting of poorly performing
firms by activist fund Oasis Management, its founder said,
paving the way for more campaigns to improve corporate
governance and deliver higher shareholder returns.
    Hong Kong-based Oasis, which does not publicly declare its
assets under management, has launched high profile campaigns
against at least six Japanese companies in the past year
demanding changes at those targets.
    "Our best allies are domestic asset managers who today see
bad corporate governance as shameful," Seth Fischer, Oasis'
founder and chief investment officer, said.
    The change heralds a potential paradigm shift in Japan's
corporate world, with domestic asset managers backing activist
engagement that could reshape corporate practices in the
country.
    Oasis is among the most prominent activist investors
operating in Japan with recent targets including the country's
largest drugstore chain, Ain Holdings  9627.T , and Kao
 4452.T , the world's second-largest cosmetics firm by revenue,
according to LSEG data.
    The Tokyo Stock Exchange and Japanese government have
encouraged firms to improve their corporate governance and
capital allocation over the past decade, as they look to lure
more global investors.
    Measures such as appointing external directors with relevant
business experience and adopting key performance indicators in
line with global peers have helped Japan's Nikkei  .N225  rally
22% in 2024 to an all-time high and captured the attention of
global investors, he said.
    "All of a sudden Japan's back on the radar. I'm fielding
calls from more people than ever before," he said.
    Fischer said only 20% of Oasis's engagement with Japanese
companies to agitate change becomes public. 
    "Every single time we've asked the company nicely,
privately. When they just don't engage, they hide, they
obfuscate, they lie, they pretend we don't exist, they ignore
shareholders, their returns continue to diminish, they don't
perform, right?," he said.
    "Then the board's failing in a job of supervising management
and then we have to engage...I'm not shy. We're not shy about
doing this."
    Oasis scored a major win in 2023 when three outside
directors at elevator maker Fujitec  6406.T  were replaced by
four candidates chosen by Oasis, after which the board voted to
oust its chairman. 
    Oasis, Fujitec's largest shareholder at the time, had
criticised the chairman's family's control over the company.
    While Japanese companies are doing away with particularly
egregious corporate governance malpractice, such as nepotism in
hiring and the misappropriation of corporate assets, "check the
box governance is not enough," said Fischer.
    Boards must hold management to account for all aspects of
business performance, including digital transformation and
marketing, return on equity, and performance benchmarked against
competitors, he added.
    There is now a much deeper pool of independent director
candidates with real management experience. Oasis used to call
upon the same few people to nominate to boards, but now it
speaks to up to 100 candidates each time, Fischer said.
    Oasis has been active in Japan since its establishment in
2002, and while tangible progress has been made, Oasis has lost
money in some cases where it could not effect change - poor
governance persisted and the management remained unaccountable,
continuing to destroy the company's share value.
    "I think in five or 10 years time, people will be shocked at
what even went on in 2024, much less what went on in 2013."

 (Reporting by Scott Murdoch in Sydney and Anton Bridge in
Tokyo; Editing by Sumeet Chatterjee and Jacqueline Wong)
 ((Anton.Bridge@thomsonreuters.com;))