All Shareholders Aren't Equal, a Japan Inc. Elder Statesman SaysBy and
Yoshihiko Miyauchi says activism is short-sighted ‘money game’
Orix senior chairman says he favors introducing class shares
Yoshihiko Miyauchi knows his views aren’t widely held, and that they can be seen as controversial, but he’s sticking to them anyway.
All stock owners shouldn’t be treated the same, says Miyauchi, the senior chairman of the $23.5 billion financial and leasing group Orix Corp. Some of them -- activist investors -- are “short-sighted” and only interested in money, he says. One way around this would be to allow so-called class shares in Japan -- to keep voting rights away from investors who “buy today and sell tomorrow.”
“Shareholders aren’t equal,” the 82-year-old Miyauchi says in an interview in Tokyo, referring to why he favors class shares. And activism is just a “money game.”
Miyauchi, who has previously suggested taking voting rights from stock holders who haven’t owned shares for a certain period of time, says Japan should follow the example of the U.S. and Hong Kong by letting companies list different classes of shares. That way, control over a firm could be concentrated among people focused on its longer-term growth. He says Toyota Motor Corp.’s “Model AA” shares, aimed at long-term investors, are a positive development.
Miyauchi’s views stand in sharp contrast to those of many corporate governance experts, who say Japan needs to reduce its web of cozy stock ownership known as cross-shareholdings. But Miyauchi says “stable shareholders” are a good thing.
The comments come amid increased shareholder activism in Japan following moves by Prime Minister Shinzo Abe’s government to encourage more dialogue between company executives and shareholders. Investors from Oasis Management Co. to Dalton Investments have been starting proxy fights this shareholder meeting season as they seek to alter behavior at companies, including calling for greater shareholder returns.
Some of them strongly oppose Miyauchi’s comments.
They are “extraordinarily dramatic statements,” says Seth Fischer, chief investment officer of Oasis, the Hong Kong-based hedge fund that has pressed for changes at companies including Nintendo Co. and Alpine Electronics Inc. “And I disagree with all those statements.”
Fischer says there are different types of activists operating in Japan today. He says almost none of Oasis’s campaigns in Japan have been about calling for dividend payments, and that Oasis has companies’ long-term interests at heart.
“In all of our cases, we’re talking about how to create a better company,” Fischer says.
In fairness to Miyauchi, his views on activist shareholders are more nuanced than some of his comments, taken in isolation, might suggest. He says there tends to be good reason why particular companies are targeted, and their executives often “have problems.” But structurally, activists tend to be short-termist, he says.
“Activists find a distortion in the market, and they try to make a profit by calling it out,” Miyauchi says. “They are basically short-sighted. They’re not thinking about the company’s long run. In a sense, it’s a money game.”
And his criticism isn’t limited to activists.
From his perspective as a businessman, it wasn’t economic policies that caused Japan’s two so-called lost decades from the early 1990s. Rather, it was that chief executive officers became less aggressive and less innovative. Japanese companies, like all organizations, are filled 90 percent with “bureaucrats” and 10 percent with “business people,” he says, and Japanese firms must start picking risk-taking business people as leaders, instead of choosing nice, conservative types.
“It’s all about selecting the best leader from the 10 percent,” Miyauchi says. “The rest -- the bureaucrats -- will follow.”
Japan’s corporate governance reforms are currently too focused on stopping bad behavior, according to Miyauchi. And while there will always be corporate scandals in every country, and checking for them is necessary, it’s more important in Japan today to focus on running companies aggressively to achieve growth, he says. They’re pressing the brake when they should be hitting the accelerator, according to Miyauchi.
Miyauchi is also critical of investment funds, because he says they’re always forced to sell shares when their investors withdraw money in times of financial crisis. He says he prefers individual investors, who can have a longer investment horizon.
Miyauchi, who’s relaxed and prone to laughter while expressing his positions, says that they are just his personal views.
“They are minority opinions,” he says.