Corporate Japan is experiencing a marked shift in investor dynamics, as a record number of shareholder proposals passed at annual general meetings this year. The trend signals growing assertiveness among investors and a waning tolerance for underperformance or complacent governance.
According to Mitsubishi UFJ Trust & Banking Corp., seven companies saw shareholder proposals adopted at their AGMs, the highest number since the bank began collecting data nearly 30 years ago. These resolutions included board nominations and governance reforms, highlighting a departure from the historically passive stance of Japan’s shareholder base.
The uptick in successful proposals reflects a broader wave of activism sweeping through Japanese boardrooms. Investors, particularly activists, have inundated companies with unprecedented volumes of resolutions, ranging from calls for real estate divestment to strategic realignment and capital returns via share buybacks.
While overall shareholder support still leans towards incumbent management, the shift in voting patterns points to a gradual erosion of deference. This development coincides with increasing pressure from the Tokyo Stock Exchange and activist funds to improve capital efficiency and deliver higher shareholder returns.
“Shareholder pressure is likely to increase given there is still much room left for improvement,” said Naoki Fujiwara, senior fund manager at Shinkin Asset Management. “The acceptance of activists’ proposals is a significant change from the past.”
Alongside the rise in approved shareholder resolutions, there has also been a marked increase in the rejection of management-sponsored motions. According to Sumitomo Mitsui Trust Bank Ltd., 30 company proposals—primarily board director nominations—were voted down this year, a sharp rise from just six the year before.
One of the most striking examples occurred at Tokyo Cosmos Electric Co., where all five board nominees put forward by the company were rejected. Shareholders replaced the entire board, including the chief executive officer, with individuals proposed by top investors. Similarly, at Taiyo Holdings Co., the CEO was voted out, reinforcing a trend of growing scrutiny towards executive performance.
Data compiled by Goldman Sachs Group Inc. shows a decline in CEO confidence ratings, with the percentage of executives enjoying approval ratings above 80% falling by 1.1 percentage point year-on-year. As traditional cross-shareholding arrangements unwind, the resulting void is being filled by more vocal and independent shareholders, including global asset managers and hedge funds.
Still, not every effort by activist investors has been successful. At Fuji Media Holdings Inc., shareholders rejected all 12 director candidates nominated by Dalton Investments. The broadcaster, already under public pressure due to a scandal, retained its management in the face of external challenges.
Despite mixed results, the tone of shareholder engagement has undeniably evolved. Hisashi Arakawa, director and head of equities at abrdn Japan Ltd., observed that many firms are increasingly initiating dialogue ahead of AGMs. “We’ve seen companies pro-actively engage with us ahead of shareholder meetings,” he noted. “Whether these proposals pass is a separate matter.”
This rising momentum of shareholder empowerment underscores a maturing market in Japan, where investor influence is no longer confined to the sidelines but is now reshaping corporate governance from within.
-Bloomberg
