Tag: Activism

Message to JR Kyushu Shareholders

2020-06-11 posted by

Fir Tree Partners submitted a shareholder proposal nominating me as an outside board director for JR Kyushu. This all began as Fir Tree, the largest and longest holding, active shareholder of JR Kyushu since its IPO, was working in dialogue with the Company to find suitable new board candidates. I accepted the nomination because I believe the current needs of the JR Kyushu board fit well with my previous professional experience as well as my knowledge base. In particular, my experience as both analyst and corporate executive should be helpful as I am in favor of dialogue between investors and companies.

In mid-April, I was surprised to learn that JR Kyushu management, after spending months screening and interviewing the various candidates, ultimately decided to reject all candidates that were under consideration with Fir Tree. At this time, Fir Tree asked us to be their shareholder candidates for this year’s annual meeting. Even though being elected to a board as a shareholder proposal candidate is still rare in Japan, I decided to accept the role because I feel strongly about the importance of good governance and the role of completely independent outside directors. As I learned more about JR Kyushu in the past few months, I have concluded that I can add to the JR Kyushu board the diversity, perspective, and expertise that I have developed as an analyst, fund manager, investor relations professional and corporate executive in charge of governance matters. To this end, I believe I can help JR Kyushu in addressing the current challenges caused by Covid-19 as well as fulfill its full potential.

I would also like to publicly state that I am completely independent from Fir Tree and have told them directly that at all times. Fir Tree approached me through the help of a third-party search firm. I previously knew nobody at Fir Tree. There is no financial arrangement between us. I will remain independent from Fir Tree should I be elected as a director of JR Kyushu. I will consider Fir Tree’s opinions as no more or less important than those of any other shareholder, large or small.

If elected to the JR Kyushu board, I would be completely open minded and unbiased. I would review all board matters carefully in consultation with the other board members, management, and shareholders utilizing both public and non-public information in order to form my own opinions. I would endeavor to make well informed decisions that are best for all stakeholders.

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”Global and Regional Trends in Corporate Governance for 2017” by Russell Reynolds Associates

2017-02-12 posted by

”Russell Reynolds Associates recently interviewed numerous institutional and activist investors, pension fund managers, public company directors and other governance professionals about the trends and challenges that public company boards will face in 2017. Our conversations yielded a wide array of perspectives about the forces that are driving change in the corporate governance landscape.

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”Do Institutional Investors Demand Public Disclosure?” by Stephen A. Karolyi and Andrew Bird

2016-10-17 posted by

”Do institutional investors demand corporate disclosure? A central question in finance and accounting is whether corporate transparency benefits or hurts investors. This issue is complicated by the fact that information provision could affect groups of investors differentially. Public information may crowd out the private information advantage of some institutional investors; alternatively, investors, particularly those following more passive trading strategies, may not be information sensitive. However, even passive institutional investors may benefit from an increase in monitoring by other stakeholders following improved disclosure. Further, regardless of the preferences of institutional investors, whether or not they are able to affect corporate policy on this margin is unclear. This tradeoff is reflected in mixed empirical evidence on the relationship between institutional ownership and corporate disclosure.

To address this tradeoff faced by institutional investors, we analyze the revealed preference for corporate disclosure by institutional investors and the associated impact on the information content of corporate disclosure. Empirically, identifying a causal effect of institutional ownership on corporate disclosure policy is difficult because experimental settings and direct measures of corporate disclosure quantity and characteristics are scarce. We propose a two-part solution to these problems. First, we utilize exogenous changes in institutional ownership around Russell 2000 index reconstitutions in a regression discontinuity design to identify the effect of institutional ownership on corporate disclosure policy. Second, we directly measure the characteristics of corporate disclosure using a novel data set composed of all 8-K filings between 1996 and 2006.

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”Boards in Europe – Accountability and Convergence” by Paul L. Davies Klaus J. Hopt

2016-08-15 posted by

Abstract: Corporate boards play a central role in corporate governance and therefore are regulated in the corporate law and corporate governance codes of all industrialized countries. Yet while there is a common core of rules on the boards, considerable differences remain, not only in detail, but sometimes also as to main issues. These differences depend partly on shareholder structure (dispersed or blockholding), partly on path dependent historical, political and social developments, especially employee representation on the board. More recently, in particular with the rise of the international corporate governance code movement there is a clear tendency towards convergence, at least in terms of the formal provisions of the codes. This article analyses the corporate boards, their regulation in law and codes and their actual functioning in nine European countries (Belgium, France, Germany, Italy, the Netherlands, Poland, Sweden, Switzerland and the United Kingdom) in a functional and comparative method. Issues dealt with are inter alia board structure, composition and functioning (one tier v. two tier, independent directors, expertise and diversity, separating the chair and the CEO functions, information streams, committees, voting and employee representation) and enforcement by liability rules (in particular conflicts of interest), incentive structures (remuneration) and shareholder activism. The article finds convergence in these European countries due to the pressures of competition, a pro-shareholder change supported by government and institutional investors and, to a certain degree, the impact of the EU. This convergence shows more in the codes and the ensuing practice than in the statutes. On the other side considerable differences remain, in particular as a result of the failure to adopt a mandatory „no frustration“ rule for takeovers at EU level and diverging systems of labor codetermination. The result is an unstable balance between convergence and divergence, shareholder and stakeholder influence and European v. national rulemaking.

Read full working paper here.

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Interview with Mr. Tsuyoshi Maruki

2016-07-15 posted by

An in-depth interview with Mr. Tsuyoshi Maruki, who  established Strategic Capital, Inc. in September 2012, was one of the Founding Partners of M&A Consulting (Japan’s first activist fund), and once worked “on loan” at METI (when it was known as “MITI”).

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Discussion Paper by Hideaki Miyajima et al : ”Does Ownership Really Matter?: The Role of Foreign Investors in Corporate Governance in Japan”

2016-06-13 posted by

”Abstract. After the banking crisis of 1997, corporate ownership in Japan shifted from an insider-dominated to an outsider-dominated structure. This paper analyzes the impact of dramatic changes in the ownership structure on corporate governance and firm value, focusing on the role of foreign institutional investors. There are two competing views on the role of increased foreign ownership. The positive view is that foreign investors have had high monitoring capability, and encourage improvements in the governance arrangement of firms, resulting in higher performance.

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HBS Professors: American Managers Seek to Avoid Legitimate Shareholder Proposals

2016-06-07 posted by 2 Comments

In this paper, HBS Professors Suraj, Srinivasan, and Vijayaraghavan analyze the period 2003-2013 and conclude that US managers often seek to avoid listing legitimate shareholder proposals in the proxy materials.  This is a stark contrast to the situation here in Japan, where executives must include virtually any shareholder proposal in the proxy, even if strange or rude.

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”Third Point’s Successful Shareholder Activism a Sign of Progress in Japanese Corporate Governance”

2016-05-24 posted by

”Historically, shareholder activism has rarely been successful at Japanese companies. However, as Japan moves closer to a Western model of corporate governance, shareholders may be playing a larger role in the strategy and leadership of some Japanese companies. This has recently been exemplified by the apparent influence of Daniel Loeb, from the hedge fund Third Point, on the leadership of Seven & i Holdings (“the Company”), which holds its annual general meeting on Thursday, May 26.

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Citywire: ”Japanese value is not dependent on a weak yen”

2016-05-20 posted by

”The Japanese equity market has been under pressure recently from a strengthening currency, a weakening global economy and the uncertainty caused by the Bank of Japan’s introduction in late January of a negative interest rate policy. We recognise these concerns, but think that the fears of many market participants are overdone.

As value investors we still see Japan as a fertile hunting ground.

A far greater percentage of listed companies have net cash on their balance sheets in Japan than in any other major market and net cash represents a greater percentage of market capitalisation, as shown below. Furthermore, many of those companies have significant unrealised gains on real estate holdings; and many have large holdings of listed equities, some for strategic business purposes, but some for no reason other than historic relationships.

The question that has occupied the minds of value investors like us has been how that value can be unlocked, used more efficiently and returned to investors when not needed for operational purposes. In that regard, we think that 2015 was a pivotal year for listed Japanese companies.

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