Japanese companies offer gifts to boost their ranks of loyal retail investors
More Japanese companies are giving gifts at annual general meetings (AGMs) in a practice that could increase the ranks of loyal retail investors as pressure from activist investors grows.
The pickup in gifts, from collectibles to food, has been steady. A survey by Sumitomo Mitsui Trust Bank showed 11% of firms offered them at AGMs in 2024, up from 4% in 2021.
Companies that gave cash vouchers to vote totaled more than 120 last year, five times the level in 2019, an industry group estimated.
Companies are seeking to build shareholder support as activists inundate them with an unprecedented number of proposals. Meanwhile, the Tokyo Stock Exchange and the government have called for an improvement of valuations and cuts to close ties with other firms in the form of cross-shareholdings.
"The underlying idea is to increase the number of 'fan' shareholders who will hold shares over the long term and vote favorably for management,' said Mizuki Suma, head of the legal & governance team at Sumitomo Mitsui Trust Bank in Tokyo. "When thinking of who to attract after cross shareholders go, it would be the retail investors, the fans."
Dan Castellano, a 51-year-old tech worker who has lived in Tokyo for most of his life, was disappointed when he didn't see any gifts at last month's AGM of Hub, an operator of a British style pub chain. A free T-shirt or other collectible would have been nice, he said.
But Castellano said he still has ¥25,000 ($171) worth of Hub gift points that give him a strong incentive to hold its stock. The company offers the points based on the number of shares an investor holds.
"I get a Hub card for free drinks, which I basically use to treat my friends and to kind of show off my shareholder status,' said Castellano, a follower of Warren Buffett's strategy of investing in understandable businesses. "I like attaching myself to the company, and being a shareholder is a way to do that.'
Retail investors tend to vote in favor of the management, said Kunio Marutani, a researcher Mitsubishi UFJ Trust & Banking Corporation. Some firms hope that through exercising voting rights, individual shareholders will develop a sense of participation in management and hold shares for the long term, he said.
While some analysts point out that focusing on shareholder loyalty could distract management from improving corporate governance, the practice may get first-time equity holders more interested in the company's business.
Takahiro Shinozaki, a 30-something construction professional who has attended dozens of AGMs in the past, said the meetings give him a chance to learn more about the companies. Shinozaki said he votes for management 90% of the time.
"It's important to promote the right to participate in management decisions through the gift vouchers they provide,' said Shinozaki, who often takes a half-day off to attend AGMs. "The proportion of individual shareholders will increase more and more in the future, and retail investors will have a lot more impact.'
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