Yasuo Takeuchi remembers the horror he felt in 2017 when, as chief monetary officer of Japan’s Olympus Corp, he was informed an activist investor had taken a stake in the firm: the barbarians have been at the gate.
But as he listened to proposals from ValueAct Capital, Takeuchi started to see the San Francisco-based fund as a possible catalyst for change at Olympus, which was nonetheless reeling from an accounting scandal and, he believed, remained too home in its outlook.
Fast ahead to 2021, a leaner Olympus is on observe to double its working revenue margin to twenty% by the subsequent monetary yr.
Olympus is a notable instance of how attitudes at some Japanese firms have quietly modified in latest years. The authorities’s latest push for higher governance has introduced in a wave of seasoned world activists, comparable to Elliott Management and Third Point, to Japan; the variety of activist funds working in the nation has additionally greater than doubled in three years.
In 2019, Olympus introduced a ValueAct associate, Robert Hale, onto its board. ValueAct owned greater than 5% of Olympus, the fund’s first funding in Japan, earlier than promoting a few of that late final yr.
”I used to be prepared to show all of our enterprise as normal the other way up,” Takeuchi, now CEO, mentioned of the time he introduced Hale on board.
”Rob actually watches the firm carefully and analyses it. He has typically given us some nice perception in the best way to execute,” he informed Reuters in an interview.
Olympus has since overhauled the conventional seniority-based pay and introduced in extra abroad executives to make administration extra world. Takeuchi credit ValueAct with serving to him ”suppose deeper” about governance, resulting in the creation of nominating, audit and compensation committees.
Efforts to turn into a world medical-technology agency have accelerated. Olympus has purchased a number of abroad medical-equipment corporations and bought its digital digital camera enterprise that had been a long-time money-loser.
Takeuchi mentioned Hale by no means informed Olympus to promote the digital camera enterprise, solely that he ”identified points, like different exterior administrators”.
Hale has additionally helped Olympus talk its modifications to the market, in order to have a larger affect, Takeuchi mentioned.
Investors seem like taking notice. The firm’s shares have almost trebled since early 2019, versus a couple of 30% achieve in the TOPIX index.
ValueAct declined to touch upon the story.
’MORE CONVINCING’
Investors, notably overseas ones, have lengthy argued that many Japanese firms are unresponsive to shareholders and want to enhance governance. Issues round governance and administration have come underneath the highlight in accounting and different scandals at Toshiba Corp, Olympus and elsewhere.
Olympus’ plan to spice up effectivity ”grew to become extra convincing round the time it determined to ask ValueAct to its board,” mentioned Takashi Akahane, senior analyst at Tokai Tokyo Research Center.
Japanese chip and show supplies maker JSR Corp, which is greater than 7% owned by ValueAct, can also be inviting Hale onto its board.
The firm hopes the American’s information and experience will increase its company worth, mentioned Director Hideki Miyazaki. It needs to hurry up resolution making and turn into extra world, Miyazaki mentioned.
Joe Bauernfreund, chief government of London-based Asset Value Investors (AVI), says he sees clear modifications at Japanese firms.
As a overseas investor focusing largely on smaller firms, his fund hardly ever received to fulfill administrators of firms just a few years in the past, he mentioned. ”I feel there undoubtedly is a willingness on the a part of firms now to work in a extra constructive method with so-called activists.”
Activists themselves are additionally taking a distinct tack, transferring away from hostile takeover threats seen a long time in the past to a give attention to governance and long-term company worth. That method, specialists say, is prone to have extra success – and achieve extra help from standard institutional buyers.
Last month, a movement by Singapore-based activist investor Effissimo Capital Management in Toshiba Corp received approval at a shareholder vote, the first time at such a excessive profile firm in Japan.
Still, specialists notice it’s too early to say shareholder activism has taken full root in Japan.
Sony Group’s rejection of Third Point’s proposal to spin off its chip unit is a outstanding latest instance, and regardless of Effissimo’s success at Toshiba’s vote the agency’s administration is but to completely embrace the activist investor.
”Companies like Olympus are just a few exceptions, with most corporations hoping to remain away from activists,” Kazunori Suzuki, professor at Waseda Business School, mentioned. ”But if these early examples show profitable and obtain public acclaim, others might observe go well with.”
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