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“Could not get my Sekisui House reform thoughts across”

(“A defeated general talks of the battle” series)


Mr. Fumiyasu Suguro, former director and senior managing officer, Sekisui House, Ltd.

July 17, 2020

Nikkei Business


For the shareholders’ meeting of Sekisui House held on April 23, 2020 he made a shareholder proposal to renew the management team.  US voting advisory firms recommended to vote for his proposed slate, but it was a complete defeat with none of his slate directors elected.  Although he appealed for the company's fall including lack of corporate governance, the company’s recent business performance was good and he could not win over shareholders.

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Mr. Fumiyasu Suguro

Former Director and Senior Managing Officer, Sekisui House, Ltd.

Born in 1957.  Joined Sekisui House in 1982.  Became an executive officer in 2008.  Served as Secretariat and Chief Manager of International Business Department.  Became a director in 2014.  Contributed to the growth of the company’s overseas business which accounted for 20% of its profit in the year ended January 2020.

I made a shareholder proposal at the shareholders’ meeting in late April in cooperation with Mr. Isami Wada, former Chairman, to renew the management team.  I nominated 11 slate directors but none of them were elected.  I feel very sorry for those who fought together with me.


There are three reasons for the failure.  The first one is that the evidence we presented lacked impact on the shareholders’ voting decisions.


Focused on Land Fraud Incident

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Investigation Report that covered up material facts

We focused on the lack of governance which was revealed as a result of a fraud incident related to a land transaction in Gotanda, Tokyo in 2017.  Sekisui House was defrauded by a fake landlord group of 5.5 billion yen.  It is up to judicial decisions to determine whether it is unlawful or not, but all the material facts had to be disclosed to all the shareholders.  However, the company covered up a number of unfavorable facts in an investigation report submitted in January 2018 by the Investigation Committee.


Given the inappropriate internal procedure for the land transaction as well as Mr. Toshinori Abe (current Chairman)’s heavy responsibility for the incident, Mr. Wada proposed at a board meeting Mr. Abe’s resignation, but instead Mr. Wada was forced to resign.  Despite all of these, the management team told a lie at a press conference saying that Mr. Wada’s resignation was meant to be an alternation of generations.


Two years have passed since then.  During this time there was a request from a shareholder to disclose the investigation report, but the company has been refusing to do so.  The management team’s control was strengthened and the company’s mentality got even worse.


Now many employees are just following the management team’s instructions, not caring about the business or clients, and their motivation has been diminishing.  I couldn't continue to see the company act in bad faith with shareholders and the public.  That is why I stood up.

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Land fraud site in Gotanda, Tokyo (Jiji Press)

We had a trump card.  There were a number of dubious facts in the land transaction, so I thought we could impress the shareholders how bad the cover-up was.  In cooperation with Mr. Christopher Douglas Brady who became our slate director and is an intelligence expert in the U.S., we sought to find out new evidence.  However we could not present any before the shareholders’ meeting.


The second reason for the failure was that we could not directly present our case to a sufficient pool of shareholders.  Sekisui House’s recent business performance has been good, with the net profit for the fiscal year 2019 being 141.2 billion yen, +10% YoY, and a higher dividend payment than the previous year was made.  A significantly reduced growth investment made this record profit possible, but I understand that shareholders focus on short-term profits.


In mid-March 2020 when we were scheduled to start meeting with shareholders, Japan began to see COVID-19 spread broadly, and in April a state of emergency was declared across the country.  It was tough to discuss the “company mentality” online.  I do not mean to blame COVID-19, but I wish I could have the opportunity to talk to the shareholders face to face.


The third reason for the failure was our strategy to replace the entire board.  A majority of our slate directors were outside directors, and despite its expected better governance, it presented a business continuity risk.  Most of the current management members are those who were involved with the fraud cover-up.  My thesis was that replacing a part of the board would not be effective enough and therefore I decided to emphasize the rationale for the whole board replacement.


Some people were opposed to having Mr. Wada as one of our slate directors.  Even after we officially made a move in February, some people erroneously assumed that Mr. Wada wanted to go back to the leadership or to revenge.  He was vital in forming the slate team.  This whole thing started two years ago when he proposed that the investigation report be disclosed, so it was natural to have him on our side.

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We sought to replace the management team in cooperation with Mr. Isami Wada and others (Jiji Press)

We were not late in initiating our move.  Our plan was to start approaching the shareholders right after all the shareholders’ meetings for those companies with December fiscal year-end were over.


It was disrespectful to the shareholders for Sekisui House to force the shareholders’ meeting under the state of emergency, and it did not warrant sufficient communication with the shareholders if the number of attendees was limited.  That is why we filed on April 16, one week before the shareholders’ meeting, a provisional disposition to the Osaka District Court of postponement of the shareholders’ meeting.


However the meeting was forced.  Only 160 shareholders, one-tenth of the previous year, were present at the meeting.  US voting advisory firms recommended to vote against the reelection of Mr. Abe and a few others, but all the company proposals were approved at the meeting.  It was a complete defeat.


Expecting the Company to Fulfill Social Responsibility


I worked for Sekisui House from 1982 for almost 40 years.  What I always kept in mind was the social responsibility in dealing with housing which is a vital part of one’s life.  Home buying is the largest purchase in one’s life in Japan.  Housing companies should be managed with transparency and need to deal with clients in a sincere manner.


I therefore wanted Sekisui House to disclose everything and to correct its excessive “management discretion.”  I regret I could not get my thoughts across.  I would like the company to face customers in a sincere manner and to fulfill its social responsibility as the basis of its business.

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