Kirin investor demands board changes or risk proxy battle
Clashes erupt at Japanese companies including Sekisui House and Sun
One of Kirin’s biggest investors has given the brewer an ultimatum, demanding it choose between a significant change to its board or risk a proxy battle at the annual meeting.
The confrontation between Kirin and UK-based Independent Franchise Partners (FP) comes as more Japanese boards are being dragged into public conflicts with investors and the market braces for what could be Japan’s most contentious season of shareholder meetings.
The clashes, and the prospect of proxy battles, are symptomatic of what analysts said is a shift in corporate Japan as emboldened shareholders confront management over what they see as value destruction, opaque strategic decisions and other lapses of governance.
In the past week alone, investors have initiated showdowns with three Japanese companies: Kirin; Sekisui House, one of the nation’s largest homebuilders; and technology group Sun. In each case, shareholders are demanding a board shake-up, an approach that has, until now, been a rarity.
The March season for annual meetings involves a relatively small fraction of listed Japanese companies, but acts as bellwether for the much busier season in June when thousands of listed companies face their shareholders. The number of shareholder proposals introduced in June has been rising for years, but is expected to smash records in 2020, said analysts.
On Tuesday, FP, which owns roughly 2 per cent of shares in Kirin, said it was willing to withdraw all four of its shareholder proposals but only if the company agreed to accept its two candidates for independent directors and if the group’s business plan for 2027 was submitted to the new board for “a thorough and independent review”.
The new proposal came after Kirin recently spurned FP’s demands for a ¥600bn ($5.5bn) share buyback, changes to executive compensation and nomination of new non-executive directors, causing its shares to fall 8.7 per cent in the past two days.
The Japanese group defended its strategy to diversify from its core beer business into biotechnology, pharmaceuticals and cosmetics, outlining for the first time profit targets for its “health science” businesses.
“All the executives unanimously agreed that it would not be possible to ensure sustainable growth by solely focusing on the beer business,” Kirin chief executive Yoshinori Isozaki said at an earnings presentation on Friday, citing a shrinking population at home and a global regulatory backlash against alcohol consumption.
But Kirin attempted to address some of the points raised by FP as it disclosed plans to create a new board that would be majority composed of independent directors, and to introduce performance-based compensation schemes for directors.
The company declined to comment on the latest proposal from FP but added that there was no change to the strategy it outlined on Friday.
Meanwhile, a boardroom battle has erupted at Sekisui House as its long-serving former chairman and another company executive, who own a tiny stake in the company, called for the removal of its current management for their handling of a fraudulent land sale in 2017.
The confrontation stems from lingering questions on how an established housing giant fell victim to a land scam deal that led to losses of ¥5.5bn for the group. Sekisui House said it was still studying the shareholder proposal and declined to comment further.
Oasis Management, a Hong Kong-based fund that has initiated a string of activist campaigns in Japan, has also called an extraordinary meeting of shareholders in Sun to replace the current top management with a new board of directors it nominated.