In Japan Inc, activist investors come from the cold By Reuters


© Reuters. FILE PHOTO: FILE PHOTO: The Toshiba Corp logo is seen as window cleaners work at the company’s headquarters in Tokyo


By Makiko Yamazaki and Noriyuki Hirata

TOKYO (Reuters) – Yasuo Takeuchi recalls the horror he felt in 2017 when, as CFO of Olympus Corp of Japan, he was told that an activist investor took a stake in the business: the barbarians were at the door.

But listening to ValueAct Capital’s proposals, Takeuchi began to see the San Francisco-based fund as a potential catalyst for change at Olympus, which was still reeling from an accounting scandal and, he said, remained too domestic in its business. perspectives.

Fast forward to 2021, a lean Olympus is on track to double its operating profit margin to 20% by next fiscal year.

Olympus is a notable example of how the attitudes of some Japanese companies have quietly changed in recent years. The government’s recent push for better governance has brought a wave of seasoned global activists, such as Elliott Management and Third Point (NYSE :), to Japan; the number of militant funds operating in the country has also more than doubled in three years.

In 2019, Olympus added a ValueAct partner, Robert Hale, to its board of directors. ValueAct owned more than 5% of Olympus, the fund’s first investment in Japan, before selling part of it late last year.

“I was ready to shake up all of our business as usual,” Takeuchi, now CEO, said of when he brought Hale on board.

“Rob is really watching the company closely and analyzing it. He has often given us good ideas on how to execute,” he told Reuters in an interview.

Olympus has since revamped traditional seniority-based compensation and recruited more executives from overseas to make management more holistic. Takeuchi credits ValueAct with helping him “think deeper” about governance, which has led to the creation of nomination, audit and compensation committees.

Efforts to become a global medical technology company have accelerated. Olympus bought several medical device companies overseas and sold its long-losing money digital camera business.

Takeuchi said Hale never told Olympus to sell the camera business, only that he “reported problems, like other outside directors.”

Hale also helped Olympus communicate its changes to the market, in order to have a bigger impact, Takeuchi said.

Investors seem to be taking note. The company’s shares have nearly tripled since early 2019, compared to around 30% of the index’s gain.

ValueAct declined to comment on the story.


Investors, especially foreign investors, have long argued that many Japanese companies do not respond to shareholders and need to improve governance. Governance and management issues have been highlighted in accounting and other scandals at Toshiba (OTC 🙂 Corp, Olympus and elsewhere.

Olympus’ plan to increase efficiency “became more compelling when it decided to invite ValueAct to its board of directors,” said Takashi Akahane, senior analyst at the Tokai Tokyo Research Center.

Japanese chip and display material maker JSR Corp, which is over 7% owned by ValueAct, is also inviting Hale to join its board of directors.

The company hopes that the American’s knowledge and expertise will increase its enterprise value, said director Hideki Miyazaki. He wants to speed up decision-making and become more global, Miyazaki said.

Joe Bauernfreund, managing director of London-based Asset Value Investors (AVI), says he sees clear changes in Japanese companies.

As a foreign investor focusing primarily on small businesses, his fund rarely had the opportunity to meet with corporate directors a few years ago, he said. “I think there is definitely a willingness on the part of business now to work more constructively with so-called activists.”

Activists themselves are also taking a different approach, abandoning hostile takeover threats seen decades ago to focus on governance and long-term corporate value. According to experts, this approach is likely to be more successful – and benefit more from the support of conventional institutional investors.

Last month, a motion by Singapore-based activist investor Effissimo Capital Management of Toshiba Corp was approved in a shareholder vote, the first time at such a prestigious company in Japan.

Still, experts note that it is too early to say that shareholder activism has taken hold in Japan.

Sony (NYSE 🙂 The group’s rejection of Third Point’s proposal to split up its chip unit is a recent example, and despite Effissimo’s success in Toshiba’s vote, the company’s management has yet to fully embraced the activist investor.

“Companies like Olympus are a few exceptions, with most companies hoping to stay away from activists,” said Kazunori Suzuki, professor at Waseda Business School. “But if these early examples succeed and are acclaimed by the public, others may follow suit.”