REFILE-Foreign investors tackle Japan firms on governance

(Refiles to fix typo in first paragraph)

By Junko Fujita and Yuka Obayashi

TOKYO, May 15 (Reuters) - Most publicly traded Japanese companies are still not meeting investor needs with regard to corporate governance, said a group of foreign institutional investors that includes California Public Employees' Retirement System (Calpers), the biggest U.S. pension fund.

Japanese companies should review their strategies, including takeover defence measures and scheduling of annual shareholders' meetings, if they want to gain investor confidence, said a report published by the Asian Corporate Governance Association.

The report by the association, a non-profit organisation that promotes better corporate governance in Asia, was supported by seven major global investors including Britain's Hermes Fund Managers Ltd and Railway Pension Investments Ltd.

The global investors, which together manage $5 trillion in funds, said in a statement there had been a recent surge in the number of Japanese companies adopting poison pill defences, adding that such anti-takeover measures do not benefit either shareholders or the companies themselves.

"The best defence against takeovers is usually a strong share price and well-managed company," said the group.

It issued the appeal after some foreign investment groups were prevented from making further investments in Japanese companies.

The Japanese government ordered British activist investor fund TCI on Tuesday not to boost its stake in electricity wholesaler J-Power (9513.T), the first time the state has blocked a foreign investor on national security grounds.

Japanese courts last year turned down an appeal by U.S. hedge fund Steel Partners to block anti-takeover schemes adopted by condiment maker Bull-Dog Sauce Co (2804.T). Bull-Dog Sauce introduced a poison pill defence to stop the U.S. hedge fund's takeover attempt.

Companies using a poison pill defence typically seek to protect themselves from hostile takeovers by adopting an option to issue stock warrants that would dilute the stake of a fund or company launching such a takeover attempt.

"The main reason for the sudden emergence of poison pills is a largely exaggerated fear of hostile takeovers, especially by foreign firms and investment funds," the group said.

It also suggested that Japan introduce tighter rules for third-party share allotments, including limits on the quantity and price discounts.

"It has become increasingly evident in recent years that some Japanese companies are utilising third-party share placements not as a legitimate means of raising necessary capital, but rather as a way of manipulating their shareholder registers in order to ward off unwelcome corporate bidders," the group said.

The timing of shareholder meetings should be reviewed, as clustering of meetings continues to act as major obstruction to the exercise of shareholders' rights, the group said. Many companies tend to have such meetings on the same day, as most end their business year on March 31.

The investors group includes Britain's Aberdeen Asset Management plc (ADN.L) and British Columbia Investment Management Corp of Canada. (Editing by Michael Watson)