• Yomiuri Editorial
  • Shareholder Meetings

Corporate Executives Need Stronger Sense of Urgency

Companies and shareholders are increasingly clashing during general shareholder meetings. It can be said that such gatherings have ceased to function as merely a forum for approving corporate proposals and have instead become an arena for serious confrontations between companies and shareholders.

General shareholder meetings of companies whose fiscal year ends in March have reached a peak, with about 600 listed firms holding convocations on June 29, the busiest day for such meets. This year, a record-high 90 companies received proposals from shareholders. The number of individual proposals exceeded 340, a rise of about 50 from the previous year.

In the past, proposals regarding directorial appointments were passed smoothly. Nowadays, however, there is often turbulence regarding such appointments, underlining the changes occurring at general meetings.

Last year, an overseas investment fund with a large shareholding in major elevator manufacturer Fujitec Co. forced Takakazu Uchiyama, a member of Fujitec’s founding family, to step down as president due to perceived problems with his corporate governance. This year, Uchiyama’s side proposed the appointment of directors, among other suggestions, but all proposals were rejected.

At Toyo Construction Co., a marine and civil engineering firm, seven directors were selected from candidates recommended by an investment fund that wanted the company to go private, giving rise to an unusual situation in which the majority of board members are fund-recommended individuals.

At Toyota Motor Corp., meanwhile, 84.6% of voters favored the reappointment of Akio Toyoda as chairman, a drop of 11 percentage points from the previous year. This was reportedly because an advisory company that advises corporations about their voting rights cited problems with the reappointment, saying Toyota’s board of directors was not sufficiently independent.

Company management teams should work with a sense of urgency and strive to improve corporate value and reform corporate governance.

At general shareholder meetings, proposals abound regarding the return of profits to shareholders.

An overseas investment fund proposed that general contractor Kumagai Gumi Co. increase dividends and buy back its own shares, thus leading to an increase in the share price. At Obayashi Corp, a major construction firm, meanwhile, a proposal requesting higher dividends was rejected.

Foreign investment funds known as “activist shareholders” tend to pursue short-term profits. There are concerns that they could hinder a company’s future growth mainly by demanding business breakups through sell-offs and prioritization of profit returns over investments.

To avoid a situation in which corporate management is thrown into disarray by activist shareholders’ assertions, companies should clearly state their strategies for long-term growth and explicitly detail such aims to a large number of shareholders. It is hoped that companies will indicate their intention to strengthen investment in human resources, such as by raising wages, in addition to investing in digitization and other growth areas.

Shareholder demands are increasingly diverse. Overseas asset management companies and others asked Toyota, three megabank groups — including Mitsubishi UFJ — and Mitsubishi Corp. to disclose details of their decarbonization efforts.

Some institutional investors also are emphasizing the appointment of women directors. It is hoped that firms will listen to the varied voices of their shareholders and reform management accordingly.

(From The Yomiuri Shimbun, June 30, 2023)