An electronic stock board showing the Topix Index displayed inside the Kabuto One building in Tokyo, Japan, on April 3, 2025. - Bloomberg
TOKYO: A record number of Japanese companies saw shareholder proposals pass at their annual meetings this year in a sign that investors are exerting more influence in the market.
While shareholders in general still support company management, the notable break from their passive stance is seen as a boon for funds looking to invest in Japan.
Activist investors have been inundating companies with an unprecedented number of proposals at meetings, calling for action such as the disposal of real estate, changes in strategy and stock buybacks.
Seven companies saw shareholder proposals pass this year, including board appointments, according to Mitsubishi UFJ Trust & Banking Corp. That’s the highest since the bank began compiling the data almost three decades ago.
Although a higher number of overall proposals may have helped lift the tally, the increase showed that proposals are facing less opposition from investors who may have been reluctant to confront management.
This comes as Japanese firms face pressure from the Tokyo Stock Exchange and activists to boost their value and improve shareholder returns.
“Shareholder pressure is likely to increase given there is still much room left for improvement” in capital efficiency, and that will be good news for the market, said Naoki Fujiwara, senior fund manager at Shinkin Asset Management.
“The acceptance of activists’ proposals is a significant change from the past.”
Not only are more investors voting in favour of shareholder proposals, but they’re also rejecting company pitches.
A total of 30 company proposals, mostly the nomination of board directors, were voted down, up from six the previous year, according to Sumitomo Mitsui Trust Bank Ltd.
At Tokyo Cosmos Electric Co, all five board candidates nominated by the auto parts maker were struck down, resulting in the entire board, including its chief executive officer (CEO), being replaced by those proposed by its top holders.
Shareholders also ousted the CEO of chemicals maker Taiyo Holdings Co, suggesting investors are scrutinising management more than ever.
The percentage of companies with more than an 80% CEO approval rating fell by 1.1 percentage point from the previous year, according to data compiled by Goldman Sachs Group Inc.
Companies are losing their loyal shareholder base as cross-shareholdings unwind, leaving a vacuum for activists and other investors to step in.
Not all high-profile cases turned out a win for activists or vocal investors.
At Fuji Media Holdings Inc, a TV broadcaster facing a sex scandal, shareholders voted against all 12 candidates proposed by Dalton Investments.
Hisashi Arakawa, director and the head of equities at abrdn Japan Ltd, said active engagement between shareholders and management is likely to continue.
“We’ve seen companies pro-actively engage with us ahead of shareholder meetings”, and whether these proposals pass is a separate matter, he said. — Bloomberg
