Consider ways to promote long-term growth in discussions

Editorial

12:25 JST, July 2, 2022

It is important to deepen dialogue with shareholders to enhance corporate value. General shareholders meetings must be forums for constructive discussion to promote long-term growth.

The peak period has passed for the holding of shareholders meetings by listed companies whose business year ends in March. The greatest number of meetings were held on Wednesday, with about 600 of the companies, or 26%, choosing that day. This is the lowest such figure on record.

In the 1990s, more than 90% of general shareholders meetings were held on the same day as a countermeasure against sokaiya racketeers who would make unreasonable demands during the meetings. It is now easier for stockholders who hold shares in more than one company to attend the meetings. It is hoped that this will lead to more active discussions.

General shareholders meetings that can be viewed online have taken root amid the novel coronavirus pandemic. Nearly 20% of listed companies stream their meetings online. An increasing number of companies are said to have introduced a system to allow shareholders to exercise their voting rights in advance via smartphone.

Advances in digitization must be utilized to promote dialogue between companies and shareholders.

This year, more than 70 companies received proposals from shareholders, with about 300 proposals submitted, both record highs. General shareholders meetings are no longer simply places to approve company proposals.

Proposals concerning climate change were prominent, with Mitsubishi Corp. being asked by an Australian environmental group to disclose plans on climate change measures, including greenhouse gas reduction targets, in its articles of incorporation. Electric power companies also received proposals for disclosures of their decarbonization efforts.

Shareholders have also taken a tough stance regarding scandals. Criticism erupted at the general meetings of Mizuho Financial Group, Inc., which experienced major system failures, and Mitsubishi Electric Corp., where fraudulent inspections were uncovered.

Normally, the percentage of votes in favor of proposals to appoint a president to the board of directors exceeds 90%, but in some cases the percentage dropped to the 60% range at companies that have been involved in scandals.

Scandals have even hit companies that are supposed to have strengthened their corporate governance by increasing the number of outside directors, among other measures. Rather than superficial changes, companies should use tense exchanges with shareholders at general meetings to stimulate reforms in corporate governance.

At Toshiba Corp., shareholders approved a proposal to appoint 13 directors, including two from foreign funds, who, as activist shareholders, have pressed for management reform. However, management continues to be in disarray following the resignation of an outside director who opposed the appointments of directors from specific funds.

There is growing momentum globally to correct the principle of “shareholder primacy.” It is not healthy to place undue emphasis on the demands of specific shareholders.

The trend of putting greater emphasis on corporate social responsibility is growing. Shareholders, not only in the case of Toshiba, should encourage investment that delivers long-term growth rather than short-term profit returns.

(From The Yomiuri Shimbun, July 2, 2022)