Shareholder proposals gain traction in Japan as activism thrives

By Makiko Yamazaki

TOKYO (Reuters) -Shareholder proposals gained more traction in Japan this year as a number of resolutions received greater support, data showed on Monday, building on recent momentum in shareholder activism in the world’s third-largest economy.

During the 2023 annual general meeting season through June, a total of 81 shareholder proposals were voted on at Japan’s top 225 companies, up from 63 in 2022, according to an annual review by proxy solicitor Georgeson.

Although none of the shareholder proposals succeeded at the top 225 companies, 41 of such resolutions at 14 different companies received 10% or more support from shareholders, according to the review. In 2022, there were 32 of these resolutions at eight companies.

Activists were long viewed as asset-strippers to be resisted in Japan’s insular corporate culture, but the perception is changing as regulators are backing their calls for better governance and more traditional asset managers are voting for their proposals on merit.

A proposal that Kansai Electric Power disclose climate transition plans received the highest rate of support, of 36.5%, followed by the election of one of ValueAct Capital-backed directors for Seven & i Holdings with 34.1% support.

Cas Sydorowitz, global CEO of Georgeson, told Reuters in an interview that he expected the Tokyo Stock Exchange’s recent push for better capital efficiency to create greater pressure on companies and more opportunities for activists.

“Not only in Japan but more globally, activism is on the rise,” he said. “Shareholders are asking for more and more things, whether those are director elections, reviews of the business practices, and so forth.”

The Georgeson review also showed a higher number of management-sponsored resolutions have faced considerable opposition, with 13.6% of management-proposed director elections receiving 10% or more opposition.

This is an increase from 12.5% in 2022 and 8.9% in 2021, due partially to larger scrutiny around cross-shareholdings, a common practice where companies take stakes in partners to cement relationships and avoid activist investors.

The review was jointly published by Mitsubishi UFJ Trust and Banking Corp unit Japan Shareholder Services. Georgeson is owned by Computershare.

(Reporting by Makiko YamazakiEditing by Shri Navaratnam)