Japan’s activists chip away slowly but unsurely

Toshiba Corp. Chief Executive Taro Shimada poses for a photograph during an interview with Reuters at the company headquarters in Tokyo, Japan, June 7, 2022. REUTERS/Issei Kato

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 read more 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 read more , 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.

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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), 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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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)


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 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 from the board following the annual general meeting.

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Editing by Jeffrey Goldfarb and Thomas Shum

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Jennifer joined Breakingviews after three years as Reuters’ Asia Finance and Markets Editor. Prior to that, Jenn spent 18 years at the Financial Times covering various aspects of banking, finance and markets in London and New York before her move to Hong Kong in 2012. Jennifer has a BA in History from the University of Exeter and won a Knight-Bagehot fellowship to study at Columbia University, where she earned an MSc in Journalism studying alongside the MBA class.