LONDON (Reuters) - A British-led investor group is lining up U.S. and European pension funds to help improve long-term corporate governance standards in Japan, after the failure of several short-term activist shareholder plays there, a director on the project said.
The Japan Engagement Consortium, set up by British fund manager Governance for Owners with Tokio Marine Asset Management in December last year, aims to engage with Japanese company boards to improve long-term shareholder returns.
Last year, activist funds The Children’s Investment Fund and Steel Partners started scaling back investments in Japan after failing to make much headway with company directors.
“Investors in Japan have had a tough time trying to push through change in terms of Western best practices,” said Simon Wong, managing director at fund manager Governance for Owners.
“Those who have done it realise that a different approach might be suitable,” he told Reuters.
Wong -- who started at Governance for Owners this week -- said the challenge was to arrive at “Japanese way” of corporate governance acceptable to both domestic and foreign investors.
“We have been in discussions with European and North American pension schemes and some have expressed serious interest in the consortium,” he said.
The Universities Superannuation Scheme and the Railways Pension Schemes - two of Britain’s largest pension schemes- have already signed up to the consortium.
London-based TCI last year sold its 10 percent stake in electricity wholesaler J-Power back to the company after it was defeated in a proxy battle aimed at securing a higher dividend and putting a limit on cross-shareholdings with banks.
U.S. hedge fund Steel Partners did win a rare victory when it toppled the board of loss-making wigmaker Aderans Holdings in May, but has been selling down other holdings after struggling to win concessions from management.
Unlike activist investors, who have tended to dictate terms to Japanese boards, Governance for Owners hopes its softly-softly approach will succeed where others have failed.
“It’s important for the engagement to take place in private in a constructive way, rather than in a confrontational manner,” GO executive director Toshi Oguchi said.
“We engage with companies on behalf of our members to improve long-term investor value, unlike others we are not short-termist.”
Oguchi said the long-term nature of its members’ interests meant that the JEC was in no hurry to see immediate progress.
“We are taking the step-by step approach to corporate governance and we are willing to be patient,” he said.
Reporting by Raji Menon; editing by Simon Jessop