Japan activist clout shown in shareholder rejection of Taiyo CEO
The Tokyo-based chemicals maker said Monday that as a result of the vote, Executive Vice President Hitoshi Saito replaced Sato as top executive.
Voting out a company's CEO candidate, something that doesn't happen often in Japan, is another sign of how activists are pushing to change company policies that they claim are weighing down shareholder returns. In 2019, shareholders of Lixil turned down candidates proposed by the housing material maker in a similar vein, choosing instead former CEO Kinya Seto.
Activist shareholders submitted a record number of proposals at annual general meetings this year that question management decisions and urge changes to board structures and privatizations.
Taiyo shares rose as much as 2.5% on Monday, poised for a fourth-straight advance, even as the broad Topix share index dropped.
The vote against Sato at the general shareholders meeting on Saturday might force the company to consider changing its management structure and strategy. Sato had said earlier this month that the company would decide on formal proposals for capital alliances, including privatization, from fewer than five private equity funds.
The Taiyo case "shows how Japan is changing and shareholders are voting for better governance, capital efficiency and a business portfolio built around core strengths rather than ego,' wrote Nicholas Benes, CEO of the Board Director Training Institute of Japan. "I cannot remember a case where a sitting CEO was deposed in Japan for the clear reason that his favorite strategy didn't work well and he was too stubborn to give up.'
A number of major shareholders, including DIC and activist fund Oasis Management, had opposed Sato's reappointment. DIC has a 19.3% stake and Oasis held an 14.9% share, according to a compiled data.
DIC criticized Taiyo as being slow in setting up a committee to study an acquisition proposal and in pushing ahead for talks with the prospective buyer. Oasis criticized Sato's compensation as being too high. According to a Taiyo filing, Sato's total compensation for the fiscal year ended March 31 was ¥307 million ($2.1 million).
Oasis said in a statement that it had called for shareholders to vote against the re-election of Sato, on the grounds that his leadership was detrimental to Taiyo's corporate governance and value.
"We are pleased,' it said, that "the collective will of shareholders has validated our position.'
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