TOKYO -- Fitness club operator Rizap Group will overhaul its governance after a series of questionable acquisitions have left the company facing a net loss.
The changes, to be announced on Friday, will include veteran business leader Akira Matsumoto stepping down as a representative director.
Matsumoto, whose career includes heading Johnson & Johnson's Japanese arm, joined Rizap in June after leading an earnings turnaround at snack maker Calbee.
He will give up representative rights, effective Tuesday, to focus on advising President Takeshi Seto on bringing discipline to a group that began as a health food company but has since branched off into businesses including publishing and video rental shops.
Rizap will adopt an executive officer system of governance. Matsumoto and Seto will remain on the board, along with three outsiders now serving as audit committee members.
"We first need to set things right and have directors who oversaw the acquisitions take responsibility," Matsumoto told Nikkei in an interview on Thursday.
He said the company needs to separate oversight and executive functions. He described the new board composition as a temporary one until more outsiders can be recruited.
Matsumoto said Rizap needs to slim down. The group has forecast a 7 billion yen ($63.2 million) net loss for the fiscal year ending March 2019.
"The headquarters is too big, and there's a lot of waste," the former manager at trading house Itochu said. Rizap can downsize the head office by half and cut 5 billion yen in nonpayroll costs, he said.
The new management will shed subsidiaries that no longer fit Rizap's vision and boost earnings at remaining ones.
On his own exit as representative director, he said that "I had too many roles and couldn't fully commit to Rizap from the start."
"I'll just return to being an adviser," he said. "I still talk with Mr. Seto almost every day."
Matsumoto, 71, had already stepped down as chief operating officer. He had a full plate with public appearances and his medical-sector activities. Some at Rizap said he was not committed enough to the company -- a criticism he apparently took to heart.
Despite his other commitments, Matsumoto played a role in preventing Rizap from taking on even more overambitious acquisitions. "We should not enter into in areas where the market is shrinking, or where we don't have experts," Matsumoto said. "We need to create a vision for the business and model our strategy on it."
Seto's first big break came from soy-based diet cookies. But his business later verged on bankruptcy as rival products flooded the market and was only saved by acquisitions. He also started the Rizap fitness business at the same time, despite opposition from his directors.
"People brought acquisition proposals to take advantage of Mr. Seto's kindness," Matsumoto said of the 40-year-old president. Past successes with acquisitions also contributed to overconfidence, he said.
"Mr. Seto was initially taken aback by my methods, but he understands me now and we have carried out governance reforms sooner than planned," Matsumoto said.