It is not often that the chief executive officers of two major Japanese companies get targeted by a corporate governance watchdog for lax oversight.
Yet that is what happened when Institutional Shareholder Services (ISS) advised shareholders of Nissan Motor Co and Nomura Holdings Inc to vote against the reappointment of their CEOs.
The recommendations suggest that shareholders are becoming less tolerant of corporate governance missteps by Japanese firms, after recent moves to empower company owners. The arrest of former Nissan chairman Carlos Ghosn, broker Nomura’s leak of market-sensitive information, and an ongoing parade of product recalls and scandals involving companies from Toshiba Corp to Kobe Steel Ltd, are among the latest that investors have had to deal with.
Japanese Prime Minister Shinzo Abe introduced new governance rules in 2015 and updated them last year, with the goal of giving shareholders more say in company decisions and stamping out self-dealing. Despite some recent successes by activist investors, progress has been slow and scandals keep popping up, fueling questions over how serious Japan Inc is about embracing reforms.
ISS, along with Glass Lewis, recommended that Nissan shareholders vote against the re-
election of CEO Hiroto Saikawa, 65, at their annual meeting this month, because of his close association with Ghosn. Ghosn, arrested in November last year and charged with financial crimes, has denied any wrongdoing.
Saikawa has been under intense pressure since the arrest, with questions about his role in Ghosn’s alleged misdeeds and Nissan’s faltering profitability.
Earlier this month, a petition filed with the Tokyo District Court’s Prosecution Board argued that the CEO should also face trial for financial crimes for signing off on accounts at the center of the Ghosn saga.
Asked about the ISS and Glass Lewis reports, Saikawa said: “I believe I should follow through with my responsibilities and I hope my stance is understood.”
In Nomura’s case, ISS said CEO Koji Nagai, 60, should be held responsible for the leakage of sensitive stock market information that led regulators to order Japan’s biggest brokerage to improve internal controls.
The firm was dropped from bond deals and missed out on a key role managing a US$12 billion equity offering in the wake of the incident.
Nagai has been in the post since 2012, when his predecessor stepped down following an insider-trading scandal.
ISS is also advising shareholders to vote against the re-election of Nomura chairman Nobuyuki Koga, citing the information leak and lax governance, along with board member Mari Sono, who it says is not sufficiently independent because she used to work for the firm’s auditor.
A spokesman for Tokyo-based Nomura was not immediately able to comment.
Nomura is to hold its shareholders’ meeting on June 24 and Nissan’s is to follow a day later.
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