By Makiko Yamazaki
TOKYO (Reuters) – Nearly 70% of Japanese firms expect an increase in proposals from activist investors, a Reuters monthly poll showed on Thursday, as the government’s push for better governance adds momentum to shareholder calls for better returns.
Japanese companies were typically seen as unreceptive to demands from shareholders seeking greater returns and more efficient allocation of capital, but that has slowly changed as the government has encouraged changes in governance to draw more foreign investors.
According to the latest Reuters poll, 69% of Japanese companies expect the number of shareholder proposals to increase from current record levels, underscoring that corporate Japan is no longer able to ignore requests from investors.
More than 340 shareholder resolutions have been submitted to about 90 listed companies for voting at annual shareholders meetings in June, when a majority of Japanese firms hold such meetings, data from trust banks have shown.
Both numbers represent record highs for the month.
Still, among 227 respondents in the poll, only three said they had received shareholder resolutions from activist investors in the last three years. The proposals included higher shareholder returns and sale of non-core assets.
Activists typically target firms with a smaller market capital where they can have large influence with relatively small investments, but their targets have become broader and more diversified in recent years, including some big names like Toyota Motor and Seven & i Holdings.
Some 30% of the respondents said they didn’t know if there would be an increase in such proposals.
Asked about what kind of stance they take toward activist shareholders, 44% said they haven’t decided and 38% said it depends on the context of their proposals. Meanwhile, 11% said they are reluctant to engage with them.
On the overall business environment, corporate managers turned slightly less pessimistic, with 74% saying conditions would be “not so good” to “bad” in the next three months, compared with 77% in the May survey.
“Profits have increased as we can now afford to pass on rising procurement costs to our product prices,” a manager at a chemicals company said.
A manager at a company in the electronics sector noted that automotive and some other businesses have been stable, but demand for consumer products has been unstable. “We can’t ignore the impact of a global economic slowdown now,” the manager said.
The Reuters Corporate Survey, conducted for Reuters by Nikkei Research, canvassed 493 big, non-financial Japanese firms on condition of anonymity, allowing them to speak more freely.
Click here for a more detailed breakdown of the poll result.
(Reporting by Makiko Yamazaki; Editing by Christopher Cushing)
