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Reuters
a day ago
- Business
- Reuters
Japan firms face record activist shareholder proposals, raising reform pressure
TOKYO, June 20 (Reuters) - Activist investors submitted shareholder proposals to a record number of Japanese companies holding annual general meetings in June, adding to pressure on firms not used to friction to improve shareholder returns and profitability. Since former prime minister Shinzo Abe, who stepped down in 2020, called for improved governance to attract foreign capital, activists have ramped up efforts, arguing Japanese stocks are undervalued and that companies allocate capital inefficiently. Over 2,000 firms hold shareholder meetings in June, of which 52 have received activist proposals, surpassing last year's record of 46, showed data from Mitsubishi UFJ Trust and Banking. That is more than four times the 12 companies that received proposals in 2018 and 2019 toward the end of Abe's tenure. Typically most proposals by activists and engagement funds are rejected. Still, some firms have subsequently introduced plans to increase returns even after unsuccessful votes. "There's no need to despair. Even if a proposal is rejected management may continue to consider it," said strategist Nozomi Moriya at UBS Securities. "I think it's important to look at corporate action over the long run." There is also an increasing number of cases in which firms adopt activist suggestions - in part or in full - in advance, to avoid a public proposal and any embarrassment to management that might bring. "It's not that we expect to win our AGM proposals, a lot of them now get withdrawn before the meetings take place" said Paul ffolkes Davis, chairman of Rising Sun Management, an activist investment advisor to the Nippon Active Value Fund. "The fact that we've never won one publicly doesn't mean to say we've never won one privately. Portfolio companies are engaging with us and acting on our suggestions more and more," Davis said. The Tokyo Stock Exchange in January last year began publishing a list of firms that have disclosed plans to improve capital allocation and corporate value, a move widely seen as naming and shaming those that fail to disclose such plans. Starting this year, the bourse under CEO Hiromi Yamaji plans to highlight companies who have sought dialogue with investors. "The greatest of all the Japanese activists is Mr. Yamaji," said Davis. Companies used to only seek help after activists publicised their proposals. Now they commonly reach out after the first or second private approach, said Hiroo Shimoda, senior manager at Mitsubishi UFJ Trust Bank's corporate consulting division. "Before it was as though we were putting out fires after they had started. Now it's more like we're doing preventative fire-proofing work," Shimoda said. Since last year, the trust bank has expanded its advisory business for private activist engagement, including how to respond to approaches and whether disclosure is necessary. Investors more broadly point to greater openness by Japanese management to discussing strategy. "In the past we wouldn't really get access to management. Now, we're meeting entire boards in the majority of our portfolio names," said Joe Bauernfreund, chief executive of London-based Asset Value Investors. "There are still so many undervalued companies in Japan, which means we've got our work cut out for us over the next few years."
Japan Times
3 days ago
- Business
- Japan Times
Record demands from activist investors driving focus on governance, efficiency
Activist investors are inundating Japanese companies with an unprecedented number of proposals that will keep executives on their toes at annual general meetings (AGMs). Firms have received a record 137 requests from activists, according to data compiled by Mitsubishi UFJ Trust & Banking. The shareholders are delving deeper into management decisions and demanding changes to board structures and privatizations. The country's jammed AGM season matters more than ever this year as investors seek signs that Japanese stocks — which have underperformed most major markets this year — can get out of a rut. The proposals are putting added pressure on management to deliver tangible growth strategies, rather than simply turning to the quick fix of more buybacks or dividends. "With new activist holdings being revealed each day, companies are paying extra attention to governance and capital efficiency,' said Rieko Otsuka, a strategist at MCP Asset Management Japan. "There's a sense of impending crisis among management about when they might be targeted,' she said. The season peaks next week, with more than 40% of listed companies — that's over 1,700 firms — set to hold AGMs. They will be at venues including the luxury Palace Hotel near the emperor's residence and the Ariake Arena, which was built as a venue for the Tokyo 2020 Olympics. Some executives are readying for drawn-out meetings as overall proposals from activists and other shareholders have increased to almost 400, according to Mitsubishi UFJ Trust. That's well over double the number a decade ago. In contrast, in the United States, total proposals this year fell 14% through May 13 compared with the January-June period last year, as investor demand declined for environmental and social issue-related changes, according to a report from ISS-Corporate based on Russell 3000 index companies. Activist investors typically acquire a significant stake and then exert pressure on a firm to influence how it's run, suggesting that the increasing presence of these shareholders in Japan may be key to driving pro-growth strategies. The scrutiny in Japan is important right now because it may help carve out a path for corporate growth amid a worsening business climate as tariffs upend key sectors of the economy. Gains in Japanese stocks have been limited this year, raising the risk that the Topix Index's two-year rally is over. "We get to vote once a year, so it's important and I think — probably more than other cultures — voting against the president or the chairman sends a pretty clear message,' said Carl Vine, co-head of Asia-Pacific equities at M&G Investments, whose holdings include Toyota and Seven & I Holdings. Even so, proposals aimed at improving shareholder returns still make up a large chunk of activists' requests, and that may provide a short-term boost to the market as deep-pocketed companies pour more cash into buybacks. In addition, activist proposals rarely get passed because of opposition from domestic investors, who tend to be quite conservative. Still, the increase in proposals comes at an unfortunate time for executives who can no longer rely as much as on cross-shareholders. The waning influence of this cohort, also known as stable or policy shareholders, may increase the clout of institutional investors at proxy fights. This puts the focus more on companies with low approval ratings and "opens up the possibility that maybe a new shareholder would come in and try and put additional pressure on management,' said Bruce Kirk, chief Japan equity strategist at Goldman Sachs Japan. All this means that AGMs are now a far cry from how they were conducted before Japan's corporate reforms kicked in and the market caught the attention of overseas investors. "There was a time when decisions were made at AGMs in a planned, harmonious, and ritualistic manner, just for the sake of it,' said Hidenori Yoshikawa, chief consultant at Daiwa Institute of Research, a Tokyo-based think tank. "Now, until the meeting ends, we don't know how it will turn out.'
Bloomberg
3 days ago
- Business
- Bloomberg
Activist Investors Flood Japanese Firms With Record Proposals
Activist investors are inundating Japanese companies with an unprecedented number of proposals that will keep executives on their toes at annual general meetings. Firms have received a record 137 requests from activists, according to data compiled by Mitsubishi UFJ Trust & Banking Corp. The shareholders are delving deeper into management decisions and demanding changes to board structures and privatizations.
Forbes
3 days ago
- Business
- Forbes
Victoria's Secret Faces Board Purge
Barington Capital CEO James Mitarotonda released his scathing letter to Donna James, Victoria's Secret board chair, calling for a leadership overhaul and foreshadowing an intense activist investor fight. The shareholder-meeting-timed missive details and derides the niche retailer's adrift strategy, stark underperformance and lax governance. Mitarotonda's correct and his letter provides a template on serious stewardship. And it's not the first time Victoria's Secret seized headlines in recent weeks. Last month, the company announced a cybersecurity incident which both shuttered ecommerce operations for two days and delayed its earnings call. That turmoil signals deeper lax governance concerns and danger for the new CFO. Not surprisingly, its 2025 proxy statement reveals the toxic governance triumvirate – incentives, incompetence and indifference – that lures troublesome attention from both hackers and activists. Quietly, that latent predicament is hardly isolated nor unique. The Barington Capital letter first lauds Victoria's Secret as 'one of the most recognized and iconic brands in the world, with tremendous visibility, consumer awareness and brand equity' but then warns has 'failed to live up to its potential since its separation from L Brands.' Since June 2021, the retailer's shares are down 57%, denting valuation by over $2.4 billion. Conversely, over the same time, a passive S&P 500 index investment returned over 42%. Such painful deficits secretly worry boards. Beyond offering strategic and operational prioritization advice, Mitarotonda's larger aims are to derail 'rubber-stamped' director re-appointments and chastise a recent 'poison pill' adoption. Both further entrench senior leadership. The combination is concerning, especially as the activist investor also points out, 'recent systems failures recent system failures raise fundamental questions regarding the Board's oversight of risk management and internal controls.' Little should be a surprise after a closer look at the proxy statement. Each director hauled in over $240,000 each last year in cash and stock compensation in 2024, with board chair James drawing over $430,000. James' re-appointment would bring her to over a quarter-century in the company's boardroom, including her time from 2003 through 2021 with Victoria's Secret's former parent company, L Brands. Her biography says she's 'not afraid to ask tough questions and challenge management's strategies and assumptions. She engages regularly with the investor community and is a valued sounding board for the CEO and other members of the executive leadership team.' Those core competencies and extensive insider knowledge will be tested with the looming activist investor row, cybersecurity investigation, resultant remediation plans and likely shareholder litigation. The proxy statement paints cybersecurity as a compliance exercise. The named executive officers do not include a senior technology executive and none is listed on the company website. It's quite likely that the CIO or CTO reports either to the chief operating or financial officer. Technology leaders who report to the CEO are more likely to have greater sway in vital digital era strategic and operational decisions. The board splits into three committees (audit, nominating and compensation), with no technology focus. Each director is categorized as 'expert, knowledgeable or familiar' across fifteen skill dimensions. None is characterized as expert in cybersecurity and six score only as familiar. Directors Sarah Davis, Irene Chang Britt, Lauren Peters and James form the audit committee, which oversees cybersecurity. Davis, former CEO of Canadian grocery and pharmacy giant Loblaw, also worked as the retailer's CFO, but lacks any formal IT experience. Chang Britt is a past Campbell Soup divisional president, heading Pepperidge Farm. Her biography indicates, "she has deep experience in business transformation and is an expert in human capital management, branding, and marketing' – but, no public accounting nor IT experience. Peters, Foot Locker's former CFO, also serves on the board of Allegion, a 'leading security products and solutions providers' which makes and services locks and biometric devices – not cybersecurity. Not surprisingly, the company reverts to boilerplate language in its perfunctory SEC filings. Tucked deep in its 2025 Q1 filing was this dismissal, "We continue to assess the full scope and impact of the incident. This incident has not caused a material disruption to our operations to date and we do not believe it will have a material impact to our fiscal year 2025. The investigation remains ongoing and we have incurred, and may continue to incur, expenses and other financial impacts related to this incident, which could negatively impact our future financial results.' Lax governance undermines readiness, responsiveness and resilience. When crises occur, poor stewardship only further distracts struggling and overwhelmed c-suites. Stock performance, regulatory reporting and fiscal management all converge at the CFO's desk. This month, Scott Sekella replaces retiring finance head Timothy Johnson. Sekella is no stranger to c-suite controversy, but even he must be puzzled by the future. He worked his way up the FP&A ranks at Under Armour and was deposed in the litigation that led to the apparel maker's notorious $434 million settlement related to aggressive revenue reporting. His most recent position as now-bankrupt Joann Fabrics' CFO ended abruptly last summer after less than two years, requiring forfeiture of a $400,000 retention bonus. Sekella now takes over an organization which missed its Q1 earnings date because financial records resided on the same compromised servers as retail sales. That necessary disentanglement is a goliath, nightmarish finance-IT-audit project which will require extensive cross-functional collaboration and hefty bills. Others openly question, despite the nature of its product line, why pictures of scantily-clad models oddly adorn the pages of regulatory filings. Will a new CFO have the courage to boldly curb incessant branding? All that adds to questions swirling about Victoria's Secret's CEO Hilary Super, who Mitarotonda criticized as someone with 'limited chief executive and public company experience, only a brief tenure in intimate apparel and does not appear to have gained the confidence of employees.' With an $8 million compensation package that incandescently towers at 880 times the median Victoria's Secret employee, Super is bound for scrutiny. Such spillover naturally spotlights all c-suite pay and performance. That's a tough spot for any new CFO -- let alone one ballyhooed in a hiring press release as 'transformational leader with extensive and diverse retail experience delivering results, driving operational efficiencies, and executing growth strategies. He has a strong retail background and record of identifying and accelerating strategies that strengthen performance and enhance profitability which I believe make him the right partner to help lead the next chapter of growth for the company.' Peers take note. Whatever the boardroom battle royale's outcome, insiders and outsiders should watch the drivers of digital era dominance, danger or discord closely. Who's poisonous?
Bloomberg
10-06-2025
- Business
- Bloomberg
Novo Climbs After FT Reports Activist Parvus Amassed Stake
Novo Nordisk A/S shares rose to the highest level in more than two months after a report that activist hedge fund Parvus Asset Management has built a stake as the Danish drugmaker struggles to keep its lead in the obesity market. The stock climbed as much as 2.5% in early Copenhagen trading.
