Outside directors and auditors without the confidence of shareholders and improvement of corporate governance | 世紀東急への株主提案に関する特集サイト
If our proposals are approved and Seikitokyu continues 100% payout ratio, the estimated share price is;
>JPY 1,800(*)
*Calculation based on dividend yield. Please find the detail of calculation in “our shareholder proposals”.

Outside directors and auditors without the confidence of shareholders and improvement of corporate governance

The largest shareholder of Seikitokyu is TOKYU CONSTRUCTION CO., LTD. (hereinafter referred to as “Tokyu Construction”) which holds 22.11% of voting rights as of end of September 2018.

Regarding outside director

The chairman of Tokyu Construction has been a member of the board of Seikitokyu as an outside director since 2010.

We judge those directors who come from major shareholders are not secured his “independency” even though he meets the requirement of outside director stipulated in the Companies Act. Therefore, if such person is nominated as a candidate for outside director, we vote against his election due to his lack of independency. The point is that we think outside directors must have independency. Many investors including us do not accept an outside director without independency even though he fulfils the requirement of outside director stipulated in the Companies Act.
The role of outside directors is to participate in the decision-making process of the board, representing minority shareholders’ interests.
The outside directors who come from major shareholders are representatives of major shareholders, not minority shareholders.

At the 2018 AGM, the favour votes for the director, Mr. Iizuka ,who come from Tokyu Construction were only 75.54%. This proves many shareholders didn’t accept him as an outside director.

Ratio of favour votes for the election of directors at the 2018 AGM

(Source:EDINET)

Regarding outside auditor

Audit & Supervisory Board of Seikitokyu consists of 1 standing auditor and 3 outside auditors. All the outside auditors are the persons related to Tokyu Construction as followings.

  • Former employee of Tokyu Construction who served in its Civil Engineering Division
  • Standing auditor of Tokyu Construction
  • Outside auditor of Tokyu Construction

It is peculiar that all of the outside auditors are related to a specific major shareholder. We hope to have candidates for outside auditor who are truly “independent”.
At the 2018 AGM, favour votes for the auditor who was former employee of Tokyu Construction were only 58.04%. Also, favour votes for the auditor who was an outside director of Tokyu Construction were less than 90%

Ratio of favour votes for the election of auditors at the 2018 AGM

(Source:EDINET)
(Note: at 2018 AGM only 2 of auditor were elected)

Under an abnormal circumstance such as outside directors lacking “independency” and Audit & Supervisory Board whose members are all related to Tokyu Construction, it is hard to say that the corporate governance of Seikitokyu is agreeable. It is important for Seikitokyu to improve the organization of boards as the first step.

On the other hand, Seikitokyu makes commendable efforts recently to improve its corporate governance structure. We hope these efforts work effectively.

  • Shares with restriction on transfer to managements as share-based payment.
  • An optional nomination committee and remuneration committee (hereinafter referred to as “the committee”) of which independent outside directors have the majority.

The disposal price for shares with restriction on transfer granted in July 2018 was JPY 735. Such price diverges 25 % from the share price, JPY 589, as of the end of March 2019. We hope the managements who were granted the shares consider how to increase its share price.

  • 株式会社ストラテジックキャピタル
 

This website is for AGM in 2019. Please find our latest proposal in 2020 here.

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