ISS Unanimously Supports All Oasis Shareholder Proposals for Fujitec EGM
Oasis Management Company Ltd. ("Oasis") is the manager to funds that beneficially own over 16.5% of elevator manufacturer and servicing company Fujitec Co., Ltd. (6406 JT) ("Fujitec" or the "Company"). In December 2022, Oasis requisitioned the Fujitec Board of Directors ("Board") to call an extraordinary general meeting ("EGM") to allow shareholders to vote on proposals to remove six incumbent directors, and to appoint highly qualified independent and experienced Outside Directors. The EGM will take place on February 24, 2023.
Oasis welcomes the recently published research report from the leading independent proxy advisory firm, Institutional Shareholder Services Inc. ("ISS"), which recommends that Fujitec shareholders vote FOR all of the Oasis proposals including REMOVAL of the six targeted incumbents and support FOR all of Oasis's Outside Director nominees (and FOR Oasis's proposals related to compensation plans for the Directors), and AGAINST the appointment of two Fujitec-sponsored Outside Director nominees.
At the 2022 Annual General Meeting ("AGM"), Fujitec's shareholders were disappointed to witness the extent to which the Uchiyama Family abused its control to exploit Fujitec and its stakeholders through numerous inappropriate related-party transactions over several years. After the withdrawal of Takakazu Uchiyama's nomination at the 2022 AGM, Fujitec's Outside Directors were complicit and supportive of an unprecedented decision that subverted the most fundamental shareholder rights ? the right to vote ? in order to protect and preserve the control of the Uchiyama Family by promoting Takakazu Uchiyama to the unelected position of Chairman.
In doing so, Fujitec's incumbent Outside Directors made a bad situation much worse by making Uchiyama no longer accountable to shareholders while continuing to be in a position of influence. In ISS's view, "the board's recent conduct" has led to an "irreparable loss of faith in the leadership", which extended their view to the questionable nominations of two additional directors, which they conclude "do not warrant support".
ISS's support for the full independent oversight refresh as proposed by Oasis reflects substantial independent assurance of the case for the collective removal of the individual incumbent Fujitec Outside Directors, and the appointment of each of the independent Outside Directors put forward by Oasis to a shareholder vote. Fujitec's shareholders, especially those that are signatories to Japan's Stewardship Code, have an important role to play in this referendum on corporate governance in Japan at Fujitec's upcoming EGM. A complete reform of the governance and oversight structures is shown to be warranted, and shareholders now have an opportunity to hold Fujitec's incumbent Outside Director group accountable for the complete neglect of their fiduciary duty to shareholders.
Today, Fujitec is a Company that has failed to realize its corporate value potential, enduring, in the words of ISS, "multi-year suboptimal operational performance... [and a] depressed valuation compared to peers". The Company has also mistreated many of its stakeholder groups and abused governance structures. To address these issues, Oasis has nominated an alternative set of six independent Outside Directors with a strong array of skills and experience to address this critical situation through introducing strong governance and overseeing a business strategy that is informed by robust dialogue with shareholders to the Company.
In this age of transparency and accountability, institutional investors need to protect the assets they steward on behalf of their underlying clients and ensure that portfolio companies are governed in a manner that remains accountable and does not misappropriate corporate assets. Fujitec casts a very unfortunate shadow over the genuine governance improvements corporate Japan has made over the years, and responsible stewards have an opportunity to send a clear signal to company boards that they will hold them accountable for poor governance.
Oasis continues to campaign for the benefit of all stakeholders, and reaffirms its recommendation to shareholders, which has now been unanimously supported by leading independent proxy advisor, ISS, to:
Vote AGAINST Agenda 1 (Fujitec's Proposal)
Vote FOR Agenda 2-7 (Oasis's Proposals)
Key statements by ISS in its voting recommendation FOR Oasis's proposals and AGAINST the management sponsored Outside Directors include:
- "Fujitec's Return on Equity (ROE) of 9.1 percent for the fiscal year ending March 2022 is substantially below Kone and Schindler's ROE of 31.9 percent and 20.2 percent, respectively (per data from Refinitiv). Furthermore, the company has underperformed peers in terms of ROE by 10.3-18.7 percentage points over the last five years."
- "Fujitec's ROIC has lagged behind each of its peers in any given year over the selected performance period. The company's chronic underperformance vs. peers in terms of ROE and ROIC is at least partly due to its suboptimal capital structure."
- "Fujitec's multi-year suboptimal operational performance under the leadership of former president and CEO Uchiyama appears to have resulted in its depressed valuation compared to peers. The company's inferior ROE and ROIC when compared to peers reflects its suboptimal capital structure."
- "Instead of setting up a third-party investigation committee composed of independent outsiders to conduct an in-depth investigation and provide a detailed report, as is usually the practice in such situations, Fujitec opted for an investigation led by a single attorney from a law firm, which had in the past provided advisory services and was currently retained on a per-project basis. Even more troubling was the timeline of events disclosed by the company, which confirmed that the board received Hirao's final report on May 25, several days after it had announced that there were no concerns with the related-party transactions."
- "The board's unprecedented actions not only undermined shareholders' most basic right, the right to vote and elect directors, but were also in stark contrast to the company's commitment and purported intention to improve governance."
- "The company claims that it is among the most progressive Japanese listed companies, citing the high proportion of outsiders and female directors on the board. Nonetheless, the outside directors' inappropriate and insufficient response to shareholder concerns reveals a different reality, in which a long-tenured president/CEO exerts so much influence over the board that the board kept him in control of the company even after a large number of shareholders have rejected his presence on the board."
- "Given the irreparable loss of faith in the leadership and the incumbent board's apparent inability to overcome Uchiyama's strong influence at the company, as shown by their decision to re-appoint him despite shareholder's objections, there appears to be merit to the dissident's argument for a complete board overhaul."
- "Given Uchiyama's presence at the company, it is unlikely that a minority presence of the dissident candidates would bring the desired change."
- "Based on these considerations, a vote for the removal of the six targeted incumbents and support for all dissident nominees is warranted. In the context of board's flawed governance practices, and considering its overall conduct after last year's contentious AGM, the company's two new outside director nominees do not warrant support."
More information and our original presentation describing the nominees can be found on our website: www.ProtectFujitec.com.
For more information please visit our website www.ProtectFujitec.com or email us at [email protected] with questions, comments, or feedback.
About Oasis
Oasis Management Company Ltd. manages private investment funds focused on opportunities in a wide array of asset classes across countries and sectors. Oasis was founded in 2002 by Seth H. Fischer, who leads the firm as its Chief Investment Officer. More information about Oasis is available at https://oasiscm.com. Oasis has adopted the Japan FSA's "Principles for Responsible Institutional Investors" (a/k/a Japan Stewardship Code) and in line with those principles, Oasis monitors and engages with our investee companies.
Important Disclaimer
The information contained in this press release (referred to as the "Document") is an information resource for shareholders in Fujitec offered by Oasis, the investment manager to private funds that are shareholders of Fujitec (the "Oasis Funds").
This material is not intended to solicit voting in favor of Oasis' proposals, to which rules concerning solicitation of proxies applies.
Oasis is not in any way soliciting or requesting shareholders to jointly exercise their voting rights together with Oasis. Shareholders that have an agreement to jointly exercise their voting rights are regarded as "Joint Holders" under the Japanese large shareholding disclosure rules, and they must file notification of their aggregate share ownership with the relevant Japanese authority for public disclosure.
Oasis disclaims its intention to be treated as a Joint Holder with other shareholders under the Japanese Financial Instruments and Exchange Act ("FIEA) by virtue of its act to express its view or opinion or other activities to engage in dialogue with other shareholders in or through this Document or any website.
This statement and related materials exclusively represents the opinions, interpretations, and estimates of Oasis in relation to the upcoming EGM. Oasis is expressing those opinions solely in its capacity as an investment advisor to the Oasis Funds.
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