Shareholders fight the power / Boards roasted at annual meetings as new rules give investors more sway

The Yomiuri Shimbun

Reviews of the business year ending in March have been taking place across the nation, with Tuesday alone seeing 1,088 firms hold their annual shareholder meeting.

Shareholder meetings this year have seen heated discussion, after new regulations were introduced requiring firms to show greater accountability and give greater weight to shareholder opinions.

Under the changes, firms must now disclose how shareholders voted on each motion--rather than merely whether the motion was passed. Shareholders are therefore aware of which motions were approved despite a number of dissenting votes.

The disclosure of executive remuneration packages of 100 million yen or more, another new requirement for listed firms, provoked complaints from shareholders of some firms who felt executives' remuneration did not match their achieved results.

At Seiko Holdings Corp.'s meeting, a number of shareholders criticized management of the firm, which was rocked by the dismissal of its president. "The firm invested in real estate, which isn't its core business," said one. "The firm should sell one of its affiliates," demanded another.

There were plenty of stern faces at Namco Bandai Holdings Inc.'s meeting, where about 45 percent of shareholders present voted against the appointment of a lawyer as an outside auditor. There has been concern over the lawyer having received payment from the firm's affiliate, Bandai Co.

Glares also abounded at the meetings of Hitachi Chemical Co. and Hitachi Metals Ltd., where more than 25 percent opposed the appointment of independent board members. The board members in question are executives of the parent firms of Hitachi Chemical and Hitachi Metals, and shareholders expressed doubts about their independence.

At All Nippon Airways Co.'s meeting, many shareholders voted against the reappointment of an independent board member who rarely attended board meetings, reflecting a desire for board members who speak for shareholders.

"Firms should pay attention to the opinions of shareholders, who are free of constraints such as mixed loyalties," said Shiro Terashita, president of investor relations services company IR Japan Inc. "When 30 percent of the shareholders oppose a motion, it's like the firm getting a red card."

The events at shareholder meetings this month show that in order to have board appointments and other motions passed, firms need to be fully accountable to shareholders.

Ending antitakeover measures

TV Tokyo Corp. and Toyo Shutter Co. are among a number of firms that will abolish their antitakeover measures after motions to do so were approved at shareholder meetings.

According to Recof Corp., a mergers and acquisitions advisory firm based in Tokyo, as of Tuesday 21 listed firms have already decided this year to get rid of their antitakeover measures.

The figure totaled 22 for the whole of last year.

Antitakeover measures were introduced by a large number of firms in 2007, with many stipulating they would review the system three years later.

Other factors behind the large number of firms dropping their antitakeover measures are changes in corporate buyout regulations and the difficulty of raising capital in the current financial climate.

Highest-earning execs named

The remuneration details of many of the nation's top executives have been revealed under a new regulation obliging firms to disclose the details of all compensation packages worth 100 million yen or more.

The fattest package for a Japanese executive announced as of Tuesday was that of Yoshitoshi Kitajima, who has been president of Dai Nippon Printing Co. for more than 30 years, and received 787 million yen in fiscal 2009.

Shareholders complained that some executives' salaries were too high.

An executive remuneration package generally consists of a fixed monthly salary, an annual bonus calculated based on business performance for the year, stock options, retirement benefits and other extras.

The current accounting system considers both fixed salaries and bonuses to be administration expenses, and thus can be paid even when a firm suffers an operating loss.

Most firms do not disclose how the amount of fixed salary executives receive is calculated, a fact that many shareholders find difficult to swallow.