Analysis-No longer silent, Japan asset managers flex muscle in legacy to Abe
By Makiko Yamazaki
TOKYO (Reuters) – Japan’s asset managers nudged the amount up one other notch at shareholder conferences this 12 months, more and more opposing administration proposals and including momentum to a coverage of attracting international traders initiated by slain former Prime Minister Shinzo Abe.
Nikko Asset Administration, Asset Administration One and others have grow to be distinct voices in Japan’s new-found activism, countering international criticism of asset managers’ rubber-stamp voting.
The pair opposed administration at a home agency by voting for board nominees proposed by a international investor, whereas in one other high-profile case, firm administration canned a proposal after some asset managers supported a international investor’s objection.
This 12 months’s instances add to a gradual change in voting sparked by Abe’s company stewardship code in 2014, and which gained impetus in 2017 with a revision requiring the disclosure of voting data for every agenda merchandise at shareholder conferences. Abe was shot and killed this month throughout an election marketing campaign.
The revision “raised asset managers’ dedication as a result of each supervisor is held accountable for every voting resolution,” mentioned Katsuya Kikuchi, affiliate director at Tokio Marine Asset Administration.
Elevated home activism is probably going to assist companies burnish credentials on points as diversified because the atmosphere, society and governance, elevating their enchantment for international traders seeking to improve publicity to Japan, asset managers mentioned.
Home asset managers have voted “in opposition to administration in growing quantities yearly for the final 5 years,” mentioned Seth Fischer, founding father of Hong Kong-based Oasis Administration, which has invested in Japanese companies together with Toshiba Corp.
Nonetheless, solely a fraction of shareholder proposals achieve help from home institutional traders. Final 12 months, these traders supported simply 6.8% of such proposals on common at shareholder conferences served by electrical voting platform operator ICJ, versus 15% amongst international counterparts.
SUPPORTING ROLE
Foreigners lead shareholder activism in Japan with home asset managers primarily enjoying a supportive function, although some traders have mentioned they hope home managers will take extra initiative and make their very own proposals for firm administration.
Some home asset managers supported Oasis which queried related-party transactions at Fujitec Co Ltd and opposed a administration proposal to appoint its chief government to the board of administrators. The elevator maker withdrew the proposal an hour earlier than its annual shareholder assembly final month.
In one other vote this 12 months, Singapore-based 3D Funding Companions’ marketing campaign to convey its nominees onto the board of IT agency Fuji Mushy Inc obtained unexpectedly excessive help of almost 40%.
These voting in favour included Mitsubishi UFJ Monetary Group Inc’s Mitsubishi UFJ Belief and Banking, Mizuho Monetary Group Inc’s Asset Administration One and Sumitomo Mitsui Belief Holdings Inc’s Nikko Asset Administration.
“Earlier than 2014, we would hear investee companies moan about international traders’ strict voting insurance policies,” mentioned Hidenori Yoshikawa, company governance marketing consultant at Daiwa Institute of Analysis. “However as home institutional traders tightened their stance, we now hear investees say home traders are stricter.”
Home asset managers have been much less supportive of firm administration than some international friends, confirmed a report by shareholder advisory SquareWell Companions which analysed voting for incumbent director elections at Japan’s 100 greatest companies.
Common help charges from 2019 to 2021 stood at 95.9% at Asset Administration One, 94.2% at Nikko Asset Administration and 88.9% at Sumitomo Mitsui DS Asset Administration. That in contrast with 99.9% and 99.7% at U.S. friends Vanguard and BlackRock respectively.
GREATER SCRUTINY
Nonetheless, it’s uncommon for an activist shareholder movement to win approval in Japan the place solely 4 instances have been profitable, partly as administration is commonly insulated by passive possession.
However home asset managers are more and more turning on management-protecting schemes, reminiscent of takeover defences and cross-shareholding preparations.
Daiwa Securities Group Inc’s Daiwa Asset Administration and different main asset managers this 12 months tightened guidelines for director voting at companies engaged in cross-shareholding, which nonetheless account for about 30% of Japan’s $6 trillion inventory market.
Additionally driving change is larger scrutiny from asset house owners such because the Authorities Pension Funding Fund and Pension Fund Affiliation for Native Authorities Officers, asset managers mentioned.
There may be additionally room for enchancment in board independence and variety, mentioned Takuya Iyoda, chief analyst at Nissay Asset Administration. Guidelines might be tightened to the extent that boards will need to have a majority of unbiased administrators, he mentioned.
“I would not be stunned if necessities for variety ultimately increase to incorporate not simply girls but additionally non-Japanese.”
(Reporting by Makiko Yamazaki; Enhancing by Sumeet Chatterjee and Christopher Cushing)
