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Sekisui House: Two voting advisory firms recommend to vote against Chairman and Vice Chairman

Asahi Shimbun

Daisuke Ikuta

April 14, 2020


Sekisui House’s meeting of shareholders where former Chairman is seeking to replace the management is soon be held on April 23, 2020.  Two voting advisory firms that are influential on overseas shareholders (whose shareholdings account for 30% of the company’s shares) issued recommendations to vote against Chairman and Vice Chairman of the company.  The company’s new board may be different from what the company has proposed.  The internal factional battle is drawing larger attention


Institutional Shareholders Services (“ISS”), the largest U.S. voting advisory firm, recommended on April 9, 2020 to vote against Chairman Toshinori Abe and Vice Chairman Shiro Inagaki citing their responsibilities for the company’s still ongoing governance issues.  ISS recommended to vote for two of the dissident slate directors: Mr. Brady, an executive with a U.S. investment fund, and Mr. Jiro Iwasaki, former executive vice president at TDK Corp.


Glass Lewis recommended in its April 7, 2020 report to vote against the four current executives including Mr. Abe and Mr. Inagaki, and recommended to vote for four dissident slate directors including Mr. Wada and Mr. Brady.


At the meeting of shareholders in 2018, 69% of the shareholders voted for Mr. Abe, and 73% voted for Mr. Inagaki.  The voting advisory firms’ recommendations “are more likely to be taken into account in recent years by institutional investors in Japan” (Hiroshi Suzuki, chief researcher at Daiwa Research Institute), and the outcome is now highly unpredictable.


The internal battle started when the “land fraud incident” happened in 2017 where the company was defrauded of 5.5 billion yen by a fraudulent landlord group.  The company’s investigation report on the fraud accused Mr. Abe that he should be held heavily responsible since he ignored a number of warnings, but the Chairman Mr. Wada failed to dismiss Mr. Abe and instead was forced to resign.  In February this year Mr. Wada, in cooperation with a current director and senior managing officer of the company, made a shareholder proposal.


Mr. Wada says “the current management team including Mr. Abe made a number of misjudgments in the land transaction, and they should not be qualified to run the company.”  He also says, the management has governance issues such that they have not disclosed the full-text of the investigation report.


Sekisui House issued in March its opinion on the shareholder proposal and said that there was no improper transaction, but the two voting advisory firms appear to have taken into account the arguments the shareholder proposal has been making.


Shareholders can vote director by director, so slate directors can be elected as far as they get a majority vote.  There is no maximum number of directors, and there is a chance that the board is a mixture of directors from both sides.  “It is like a mixture of a government party and a nongovernment party, and the company may become unstable” (a security firm research analyst).

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