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Glass Lewis’ recommendations: “Against” the TOP 4 of Sekisui House

Nikkei Business

Koichi Kitanishi

April 9, 2020


Dissident slate directors – Mr. Fumiyasu Suguro (first from left), Mr. Isami Wada (third from left) (Photo: Toyo Keizai / Aflo)

Nikkei Business learned on April 9, 2020 that the U.S. proxy voting advisory firm Glass Lewis had issued voting recommendations for the April 23, 2020 Sekisui House annual meeting of shareholders to vote against the top four incumbent directors including Mr. Toshinori Abe.   They questioned the reelection of the four incumbents saying that Sekisui House’s disclosure on the land fraud incident in 2017 has been inadequate.  Glass Lewis supported the election of four dissident slate directors, including incumbent director Fumiyasu Suguro and former chairman Isami Wada.  The proxy fight is intensifying as the annual meeting of shareholders is coming up in two weeks.


Sekisui House is seeking to elect its proposed 12 directors at the meeting of shareholders in Osaka.  They aim to keep the current management team, including Chairman Abe, Vice Chairman Shiro Inagaki, President Yoshihiro Nakai and Executive Vice President Takashi Uchida.  However, Mr. Suguro and others presented a shareholder proposal to the company with 11 slate directors, and now it is up to shareholders to choose which side to manage the company.


The land fraud, which Glass Lewis described as "insufficient risk management," took place from spring to summer of 2017.  Sekisui House purchased a condominium site in Gotanda, Tokyo, but the seller was not the true landowner of the property and lost 5.5 billion yen.  After the incident, the Investigation Committee composed of the company's auditors submitted an investigation report to the company, but Mr. Abe and other executives disclosed only part of the report, and therefore Glass Lewis said the company lacks transparency.


Recommends to vote for four slate directors proposed by the Shareholder Proposal


On the other hand, among the 11 directors on the dissident slate, Glass Lewis recommended shareholders to vote for Mr.  Suguro, Mr. Wada, Mr. Christopher Douglas Brady, Chairman and CEO of U.S. fund Chart National, and Ms. Hitomi Kato of Faria G.K.


The shareholder proposer seeks to replace the entire board, but it will accept election of some if elected.


Sekisui House’s net profit for the year that ended in January 2020 was 1,412 billion yen, a 10% increase YoY.   The dividend for the year was 81 yen, 2 yen up from the previous year, and the company forecast a larger dividend payment of 86 yen for the year ending January 2021.  On this improving business results, Mr. Suguro said, "it is because the company is holding back growth investment for the future."  He argues that the company won’t be able to maintain relationships with cooperating partners including those overseas, which will hurt long-term shareholder interests.


Sekisui House’s shareholders as of January 31, 2020 included financial institutions (40%) and foreign investors (30%).  Two years ago proxy voting advisory firms Institutional Shareholder Services (ISS) and Glass Lewis both recommended shareholders vote against Messrs. Abe and Inagaki, and now shareholders are tougher than two years ago on the company in terms of corporate governance.  Depending on ISS’s recommendation, the shareholder proposal’s blow to the “Top 4” could be significant.

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