ANALYSIS-No longer silent, Japan asset managers flex muscle in legacy to Abe

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By Makiko Yamazaki

TOKYO, July 25 (Reuters)Japan’s asset managers nudged the quantity 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 Management, Asset Management One and others have turn out 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’ commitment because every manager is held accountable for each voting decision,” stated Katsuya Kikuchi, affiliate director at Tokio Marine Asset Management.

Increased home activism is probably going to assist companies burnish credentials on points as different because the surroundings, society and governance, elevating their enchantment for international traders trying to improve publicity to Japan, asset managers stated.

Domestic asset managers have voted “against management in increasing amounts every year for the last five years,” stated Seth Fischer, founding father of Hong Kong-based Oasis Management, which has invested in Japanese companies together with Toshiba Corp 6502.T.

Still, solely a fraction of shareholder proposals acquire assist from home institutional traders. Last 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 stated 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 6406.T and opposed a administration proposal to nominate its chief govt 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 Investment Partners’ marketing campaign to deliver its nominees onto the board of IT agency Fuji Soft Inc 9749.T obtained unexpectedly excessive assist of practically 40%.

Those voting in favour included Mitsubishi UFJ Financial Group Inc’s 8306.T Mitsubishi UFJ Trust and Banking, Mizuho Financial Group Inc’s 8411.T Asset Management One and Sumitomo Mitsui Trust Holdings Inc’s 8309.T Nikko Asset Management.

“Before 2014, we’d hear investee firms moan about foreign investors’ strict voting policies,” stated Hidenori Yoshikawa, company governance marketing consultant at Daiwa Institute of Research. “But as domestic institutional investors tightened their stance, we now hear investees say domestic investors are stricter.”

Domestic asset managers have been much less supportive of firm administration than some world friends, confirmed a report by shareholder advisory SquareWell Partners which analysed voting for incumbent director elections at Japan’s 100 greatest companies.

Average assist charges from 2019 to 2021 stood at 95.9% at Asset Management One, 94.2% at Nikko Asset Management and 88.9% at Sumitomo Mitsui DS Asset Management. That in contrast with 99.9% and 99.7% at U.S. friends Vanguard and BlackRock respectively.

GREATER SCRUTINY

Still, 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 usually insulated by passive possession.

But home asset managers are more and more turning on management-protecting schemes, similar to takeover defences and cross-shareholding preparations.

Daiwa Securities Group Inc’s 8601.T Daiwa Asset Management 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 stock market.

Also driving change is bigger scrutiny from asset homeowners such because the Government Pension Investment Fund and Pension Fund Association for Local Government Officials, asset managers stated.

There can be room for enchancment in board independence and variety, stated Takuya Iyoda, chief analyst at Nissay Asset Management. Rules may very well be tightened to the extent that boards should have a majority of unbiased administrators, he stated.

“I wouldn’t be surprised if requirements for diversity eventually expand to include not just women but also non-Japanese.”

(Reporting by Makiko Yamazaki; Editing by Sumeet Chatterjee and Christopher Cushing)

((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))

The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.



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