Risk of AGM Proposals Being Rejected and Activist Activity

「Against this backdrop, activist activity targeting listed Japanese companies has continued to intensify and diversify. In particular, during the June 2026 general meeting season, shareholder proposals concerning the election and dismissal of directors were submitted one after another, making shareholder involvement in management through the exercise of voting rights increasingly evident. As methods such as opposition campaigns and shareholder proposals have also evolved, cases in which activist involvement has led to corporate restructuring or going private have increased, and pressure from the capital markets on listed companies remains strong.」

「Amid these changes, activist activity targeting Japanese companies has become even more active, and the contest over capital policy and corporate restructuring, including shareholder proposals, public campaigns and intervention in public tender offers (TOBs), has taken on an unprecedented level of tension.」

「Meanwhile, activist activity targeting Japanese listed companies has become even more active and diverse. Activity has continued after the shareholders' meetings in June, and in addition to shareholder proposals and public campaigns, activists have also intervened in TOBs, making the contest over capital policy and corporate restructuring increasingly intense. Activists are also increasing their influence by building their holdings, and more cases are emerging in which they seek various exit opportunities through proposals encouraging MBOs, going private and reviews of business portfolios.」

「During the interim consolidated accounting period, activist activity targeting listed companies became more active and diverse, while activist shareholder proposals remained at record-high levels. A broad range of issues was raised, including business strategy, corporate governance, share price and capital efficiency improvements, and reductions in cross-shareholdings.」

「Meanwhile, activist entry targeting listed companies is also increasing, and attention has focused on competition for control of listed companies and the stable securing of voting rights, including through active exercise of shareholder proposal rights. In addition, as the Ministry of Economy, Trade and Industry develops the Guidelines for Corporate Takeovers, strategic buyers (operating companies) have begun making unsolicited acquisition proposals and executing counter-bid proposals, creating the foundations for more active corporate and business restructuring.」

「In Japan's capital markets, global institutional investor funds are returning to Japanese equities following the Tokyo Stock Exchange's request for companies trading below a PBR of 1x to make improvements, while activist fund activity is also intensifying. With cases emerging in which shareholder proposals are approved and operating companies execute acquisition proposals without prior consent, Japan is finally entering an era of major restructuring, and situations involving significant pressure on the management control of listed companies are becoming more frequent.」

「In Japan's capital markets, global institutional investor funds are returning to Japanese equities following the Tokyo Stock Exchange's request for companies trading below a PBR of 1x to make improvements, while activist fund activity is also intensifying. With cases emerging in which shareholder proposals are approved and operating companies execute acquisition proposals without prior consent, Japan is finally entering an era of major restructuring, and situations involving significant pressure on the management control of listed companies are becoming more frequent.」

「Meanwhile, as the presence of Japanese companies in global markets declines, activists have begun to resume activity, and control and voting rights risks for Japan's listed companies are increasingly coming into sharper focus. As activist activity, a catalyst for these changes, intensifies, the redistribution of management resources through M&A and corporate restructuring, along with the reduction and elimination of listed companies, is expected to accelerate going forward.」

「Meanwhile, the presence of Japanese companies in global markets is declining rapidly, and the redistribution of management resources through M&A and corporate restructuring, together with the reduction and elimination of listed companies, is expected to accelerate further. This trend is already evident in recent cases in which our group has been involved, including acquisition proposals from overseas companies against a backdrop of a weaker yen, hostile TOBs between Japanese companies across industry boundaries, and increased activist activity as a catalyst for these changes. Management control risks are materializing across companies of all market-capitalization ranges.」

「During the cumulative first quarter of the current consolidated fiscal year, attention focused on competition for control of listed companies and the stable securing of voting rights, as more activists targeted listed companies and the number of activist shareholder proposals reached a record high.」

「In addition to the emergence of large activist cases, new shareholder proposals relating to climate change measures submitted by environmental activist groups reached an all-time high. Demand for support in addressing increasingly complex activist situations is therefore expected to increase.」

「During the third quarter of the current fiscal year, a landmark case emerged in Japan in which a strategic buyer (operating company) initiated a contest for control of a listed company, and the matter was resolved successfully.」

「At this point, the relaxed atmosphere surrounding voting, including among proxy advisory firms, which had continued during the COVID-19 pandemic, has reversed, and activists have begun to resume activity. Control and voting rights risks for Japan's listed companies, operating amid an era of major restructuring and ESG, are increasingly coming into sharper focus.」

「Of particular note is the fact that proposals for the election of the chair of the board and outside directors, submitted to a shareholders' meeting by one of Japan's leading companies as company proposals, were rejected after the company failed to engage successfully with domestic and overseas institutional shareholders.」

「Against this backdrop, in March of this year, some activist proposals were approved at an extraordinary shareholders' meeting requested by activists at one of Japan's leading listed companies. A fund subsequently made a public acquisition proposal, making clear that control risk is no longer someone else's problem for any listed company or board of directors.」

「During the cumulative first three quarters of the current consolidated fiscal year, signs of a new era of corporate restructuring in Japan became particularly evident, with approximately 60 domestic TOBs, excluding self-tender offers, reaching an all-time high. In particular, the number of TOBs involving strategic buyers (operating companies) competing for corporate control increased, while activity also accelerated through hostile TOBs by activists and demands for extraordinary shareholders' meetings.」

「During the cumulative first and second quarters of the current consolidated fiscal year, the trend toward stricter voting criteria at shareholders' meetings of listed companies was temporarily eased among proxy advisory firms and overseas and domestic institutional shareholders because of the relaxed atmosphere surrounding voting during the COVID-19 pandemic. Activists and strategic buyers (operating companies) were also more active than before behind the scenes in competing for corporate control, although activity appeared subdued on the surface.」

「In addition, the entry of overseas activists targeting listed Japanese companies and specific shareholder proposals by activists, including behind-the-scenes activity, have reached an all-time high,」

「Pressure related to corporate governance, business and asset portfolio reviews, including the submission of shareholder proposals by activists or indications that they will exercise their proposal rights, has reached an all-time high. Against a backdrop of securing medium- to long-term investment capital, activist investment and event-driven activity became even more vigorous during the COVID-19 pandemic, further intensifying pressure on companies.」

「Japan has now transformed into the world's second-largest market for activist activity after the United States. In addition, proxy contests and unsolicited TOBs are occurring routinely among listed companies, rapidly making it necessary for listed companies to consider Western-style M&A aimed at competing for control and restructuring management as part of their growth strategies.」

「These developments are also accelerating M&A among domestic companies. Japan's domestic M&A market is entering a new stage, with listed companies launching hostile TOBs and gaining control through hostile proxy contests, practices that had been considered taboo in Japan until now.」

「Shareholder proposals, including those from activists attracting increasing attention in the market, reached a record high, and some proposals were approved. Japan's capital markets have now undergone a major transformation toward an era in which shareholders evidently determine management and important agendas.」

「Major activists that had primarily operated in Europe and the United States began deliberately increasing their presence in Japan's equity markets. Traditional institutional investors also began using their strong shareholder voting rights to present sophisticated proposals to listed companies, marking the full-scale start of a new era of activism.」

「Against this backdrop, activists were the investor group and major shareholders rapidly expanding their influence. Supported by momentum behind ESG investing, governance activism using shareholder voting rights forcefully became widespread worldwide. This trend has now reached Japan, sharply increasing caution among listed-company clients of the group regarding capital risks.」

「Against this backdrop, overseas and domestic institutional shareholders, the largest shareholders of Japanese listed companies, accelerated their focus on ESG (environmental, social, and governance), further tightening voting at annual and extraordinary general shareholders' meetings. Activists from around the world viewed this situation as an opportunity and began operating in Japan's equity markets. Cases increased in which they targeted companies lagging in enhancing shareholder value and M&A, applying various forms of pressure while coordinating their voting rights.」

「For the group's cumulative first quarter consolidated period (1 April 2018 to 30 June 2018), the growing ownership share of overseas and domestic institutional shareholders, the largest shareholders of listed Japanese companies, and the resulting stricter voting under adoption of the Stewardship Code created an unprecedented sense of urgency around securing stable voting rights at listed companies. The number of shareholder proposals from activists and traditional institutional shareholders also reached a record high.」

「While more companies are conducting shareholder-identification investigations both domestically and overseas, driven by the increasing proportion of foreign shareholders in the capital markets, the establishment and revision of the Corporate Governance Code and Stewardship Code, and the decline in stable shareholders, major activist funds operating in Japan have intensified their activities. The entry of major U.S. activist funds into Japan is also progressing, and activist campaigns in Japan continue to increase.」

「Risks from governance activism increased, including shareholder proposals and demands from activist funds in Japan and overseas, as well as direct and indirect demands on portfolio companies concerning governance, capital policy, and shareholder returns. As the proportion of stable shareholders of Japanese companies declined substantially, demand broadened among listed companies for shareholder-relations consulting to identify beneficial shareholders not registered on the shareholder registry and help secure voting rights on a stable basis,」

「The market environment in the second quarter was marked by increasingly stringent voting by listed-company shareholders, including the start of individual disclosure by domestic institutional investors of their voting results at general shareholders' meetings and an increase in votes against proposals at listed companies' general shareholders' meetings. In addition, the activities of domestic and overseas activist funds and their engagement with Japanese companies have intensified, increasing the number of companies reviewing their capital policies, identifying their voting-rights risks, and reassessing the importance of dialogue with shareholders.」

「As activist shareholder proposals have been approved and the company's reputation has grown among companies that could become activist targets for its consulting expertise in securing control, inquiries for proxy advisory services have increased.」

「In addition to increased activity by domestic activists, overseas activists have begun operating in Japan in earnest. More companies are conducting investigations to identify beneficial shareholders and assess risks as the frequency of such investigations increases, and are conducting advance simulations of voting outcomes on proposals ahead of general shareholders' meetings.」

「We are also seeing a trend toward an accelerating increase in corporate reorganizations, M&A, and contests for corporate control, including voting rights, partly because of tax reforms, including the spin-off tax regime.」

「Large investment banking mandates increased, supporting the stable securing of voting rights arising from activist activity and contests for corporate control, as well as capital policy and M&A, resulting in revenue substantially exceeding the year-earlier period by 20.4%.」

「As ISS introduced a 5% ROE threshold and activist activity intensified, requests increased from companies concerned about the risk of shareholder proposals being rejected at general shareholders' meetings. These requests included advance simulations of shareholder voting outcomes, measures to encourage voting, and analysis of voting results.」