Japan’s activists chip away slowly but unsurely

Kyoto Financial

29/06/2022 03:53

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Hughes
    LONDON, June 29 (Reuters Breakingviews) - Companies like to
tout milestones, but not necessarily the sort at scandal-plagued
Toshiba  6502.T . The $18 billion industrial conglomerate’s
shareholders on Tuesday voted  urn:newsml:reuters.com:*:nL1N2YF04Y to add
representatives from Elliott Management and Farallon Capital to
its board, a landmark in Japan’s acceptance of pushy investors.
The slog involved with such campaigns, however, makes faster
progress tough.
    It has been nearly a decade since then-Prime Minister Shinzo
Abe started shaking up the country’s corporate governance
standards. In that context, the tripling of activist uprisings
over the last five years to 36 so far in 2022, per data provider
Insightia, counts as success. At the same time, the 60 companies
targeted publicly last year in the world’s third-largest capital
market pale next to the 456 in the United States that faced
shareholder suggestions, including on environmental matters.
    One problem is that headline-grabbers such as Toshiba and
Seven & i  3382.T , the $35 billion operator of 7-Eleven
convenience stores that ValueAct is trying to shake up
 urn:newsml:reuters.com:*:nL1N2UK039, are rare. Most targets are too small and
provincial to attract heavy hitters. Of the 24 campaigns whose
governance demands made it onto ballots for Japan’s shareholder
meeting season this month, as counted by CLSA analysts, nine
have a market value below $200 million and only three exceed $1
billion. 
    There’s more than enough lurking in Japanese balance sheets
to tempt assertive investors. Of the 2,000-odd Topix, or prime,
stocks, two-fifths have net cash worth at least 20% of their
equity, per CLSA. Theoretically obvious opportunities abound,
such as $3 billion Bank of Kyoto  8369.T   urn:newsml:reuters.com:*:nL2N2WW013, which
owns a $9 billion equity portfolio and generates a sub-2% return
on equity. Fund manager Silchester this year called on the
lender to distribute all the dividends the holdings produce.
That the bank’s revised plan to sell a tenth over three years
was considered a victory speaks volumes about expectations. 
    Japan’s plodding evolution is evident in other ways, too. It
has taken years for hedge funds to make headway at Toshiba.
What’s more, four-fifths of shareholder meetings for the
2,000-plus companies whose financial year ends in March are
being held this week alone; a full quarter take place on a
single day, making it impossible for many investors to attend.
Japan’s activists are chipping away slowly, but unsurely. 
     
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Twitter
    
    CONTEXT NEWS
Toshiba shareholders on June 28 approved the appointment of new
directors, including two from activist funds Farallon Capital
and Elliott Management. The vote followed a long campaign from
several foreign investors to push the scandal-wracked
conglomerate to consider buyout offers.
    Nabeel Bhanji, of Elliott, and Eijiro Imai, from Farallon,
each received https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.global.toshiba%2Fcontent%2Fdam%2Ftoshiba%2Fww%2Fir%2Fcorporate%2Fstock%2Fmeeting%2Fpdf%2Ftsm183e_4.pdf&data=05%7C01%7CThomas.Shum%40thomsonreuters.com%7C81ed858d59c049da459208da59766dad%7C62ccb8646a1a4b5d8e1c397dec1a8258%7C0%7C0%7C637920662451448424%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=yOg5xwhPwGiYHJGGPgtvS5Fh6KhyOVIA1meSK9yaygI%3D&reserved=0
 about 76% support while 24% of ballots voted no on them,
according to Toshiba. Akihiro Watanabe, an executive from
investment bank Houlihan Lokey, was elected to be chairman with
about 98% of the vote.
    Mariko Watahiki, a director who broke ranks with the board
and opposed the nominations of Bhanji and Imai, was endorsed by
66% of voting shareholders and rejected by 20%. She resigned https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.global.toshiba%2Fcontent%2Fdam%2Ftoshiba%2Fww%2Fir%2Fcorporate%2Fnews%2F20220628_2.pdf&data=05%7C01%7CThomas.Shum%40thomsonreuters.com%7C81ed858d59c049da459208da59766dad%7C62ccb8646a1a4b5d8e1c397dec1a8258%7C0%7C0%7C637920662451448424%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=Ece2OSUQ5J%2FXUymzQfMTAGOF0krDNvgSEW5%2B5N8673o%3D&reserved=0
 from the board following the annual general meeting.

 (Editing by Jeffrey Goldfarb and Thomas Shum)
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