Proposals brought before general shareholders’ meetings diversifying

The Yomiuri Shimbun
Members of an environmental group appeal for decarbonization near the venue of an annual general shareholders’ meeting of Mitsubishi UFJ Financial Group in Minato Ward, Tokyo, on Tuesday morning.

This year’s round of annual general shareholders’ meetings of listed companies that settle their accounts in March has peaked, with about 630 companies, or 27.3% of the total, holding their meetings on Tuesday.

As the shareholders’ proposals brought before the meetings have become diversified, arguments were made on a wide range of issues, including the recovery of business performance that deteriorated amid the COVID-19 pandemic, responses to global warming and corporate governance.

At the general shareholders’ meeting of Mitsubishi UFJ Financial Group, Inc., a non-governmental organization proposed that Mitsubishi UFJ disclose its corporate strategy in line with the Paris Agreement, an international framework on measures to fight global warming. In a preliminary vote count, 23% of the votes were in favor.

Taking measures to cope with environmental issues is likely to increase companies’ costs in the short run. But many investors consider such issues as risks that cannot be ignored from the viewpoint of ensuring sustainable corporate growth. The reinforcement of corporate governance has also drawn attention in connection with new, stricter listing criteria to be adopted by the Tokyo Stock Exchange in 2022 in line with its reorganization.

Such trends have also become the main factor behind changing attitudes on the part of investment fund operators, who had previously been intent on demanding their short-term interests, such as dividend increase and stock repurchase.

At the general shareholders’ meeting of Toyo Seikan Group Holdings, Ltd., a Hong Kong investment fund called for Toyo Seikan to beef up its efforts to deal with risks posed by climate change.

Another Hong Kong investment fund, which regards as problematic the fact that the four most recent presidents of Heiwa Real Estate Co., which owns the building that houses the TSE, have come from the TSE, proposed a ban on so-called “descent-from-heaven” appointment of top officials, a proposal that won nearly 20% of the vote.

The general shareholders’ meeting of ANA Holdings Inc., a company that suspended dividends for two years in a row, was held at a hotel in Tokyo on Tuesday. Shinya Katanozaka, president of ANA Holdings, stressed, “As the vaccine roll-out advances, demand will pick up.” As the demand for tourism has evaporated amid the COVID-19 pandemic, the airline has been in a harsh business environment. A 62-year-old shareholder from Tokyo said: “Dividend suspension is unavoidable. I will peg my hope on [ANA’s] growth strategy to be taken from now on.”

A survey by IR Japan, Inc., which offers advice to companies on ways to deal with shareholders, found that this year there have been 31 activist shareholder proposals that aim to achieve long-term growth through enhanced business strategies and corporate governance. The number is about double what it was three years ago. Shirou Terashita, the president of IR Japan, said, “Their proposals have changed into more advanced ones, aimed at having companies grow in the medium and long term, with stock prices to rise accordingly.”

‘Fully on-line’ meetings

This year, the second year of the COVID-19 pandemic, the number of companies that streamed their general shareholders’ meetings live on the Internet, as a way to curb the spread of infections, has reached 320, marking roughly a 2.6-fold increase from a year earlier. It is likely that the government will amend a related law, enabling companies to hold general shareholders’ meetings fully online with no physical venue, and that the number of companies adopting such methods will increase.

Under the Company Law, when a company holds a shareholders’ meeting, a specific “venue” needs to be set up. But the revised Law on Strengthening Industrial Competitiveness, part of which was put into force on June 16, has paved the way for shareholders’ meetings to be held “fully online.” At this year’s annual shareholders’ meetings, 10 companies approved changes to their articles of association to enable future shareholders’ meetings to be held fully online. These firms included Sumitomo Mitsui Financial Group, Inc., Takeda Pharmaceutical Co. and Z Holdings Corp., the parent company of Yahoo Japan Corp.

Kentaro Kawabe, president of Z Holdings, said, “Even those shareholders who live in far-away places can attend the meetings, while we can also reduce the cost of holding them.” Kawabe is considering changing the annual shareholders’ meeting of his company to one to be held fully online, with no need for shareholders to travel or gather, from next year onward. On the other hand, Sumitomo Mitsui Financial Group and Takeda Pharmaceutical have positioned such online meetings as options to be used in times of emergencies in the future, such as serious spreads of infectious diseases or large-scale natural disasters.

It is feared that online meetings could make it more difficult for shareholders to pose questions than at face-to-face meetings, or that the management would be able to dodge uncomfortable questions. Improving the telecommunications environment will also be a challenge. To guard against the risk of telecommunication system disruptions, only 4% of the companies that streamed their general shareholders’ meetings online this year — 14 companies out of 320 — arranged for their remote shareholders to be able to vote and ask questions rather than merely watch, according to Mitsubishi UFJ Trust and Banking Corp.

Yutaka Suzuki, an analyst at Daiwa Institute of Research Ltd., said: “Many shareholders consider it important for general shareholders’ meeting to be held in person, as a venue of exchange with the management. From now on, a combined style of holding face-to-face general shareholders’ meetings and online meetings will increase.”