SHAREHOLDER ACTIVISM IN JAPAN
R&C: Could you provide an overview of recent trends in shareholder activism in Japan? What factors are driving the uptick in activists targeting of Japanese companies?
Akira: In recent years, shareholder activists, especially activist hedge funds, have become more active in the Japanese market. There has also been a definite increase in the number of campaigns targeting Japanese companies. In Japan, small or mid-sized listed companies used to be the main targets for activists, but since some high-profile foreign activist funds including Elliott and Third Point have stepped into the Japanese market, larger companies, such as Sony and SoftBank Group – which have market capitalisations in the magnitude of a hundred billion US dollars – have become targets of shareholder activism. Recently, the number of cases in which all or part of the demands by shareholder activists were accepted by management or shareholders of companies has gradually increased. Furthermore, as a global trend, mergers and acquisitions (M&A) have increasingly become a focus for activists. Activists undertake bumpitrage campaigns by opposing existing M&A transactions to seek increased shareholder return.
Hideki: In 2015, for the purpose of promoting and achieving effective corporate governance of Japanese listed companies, the Tokyo Stock Exchange enacted the Corporate Governance Code. The Code has been expected to work as ‘two wheels of a cart’ together with the Stewardship Code, established in 2014 for institutional investors. 2015 is said to be ‘the starting year of corporate governance reformation’ in Japan. These two codes have improved the mindset of corporate managers toward governance and capital efficiency, and engendered gradual changes in Japanese companies and the Japanese market. Accordingly, Japanese companies that defy such trends – companies with problematic governance and poor capital efficiency – become more vulnerable to shareholder activism.
Jul-Sep 2020 Issue
Mori Hamada & Matsumoto