TOKYO -- Institutional investors in Lixil Group aim to remove top executives, including the CEO, Nikkei learned Tuesday, after a leadership shuffle raised doubts about the Japanese housing materials supplier's corporate governance.
A team of about five stakeholders, including the U.K.'s Marathon Asset Management and Polar Capital, will propose an extraordinary shareholders meeting, according to senior officials at the involved investors. They will call for the replacement of executives including Chairman and CEO Yoichiro Ushioda, who hails from a founding family of a Lixil predecessor.
The joint proposal focuses on last fall's replacement of then-CEO and President Kinya Seto, which sparked protest from investors over an opaque decision-making process. The reshuffle installed Ushioda, a member of the board's nominating committee, as CEO while keeping him as board chairman, with former outside director Hirokazu Yamanashi slated to be brought on as president to replace Seto.
The investors seek to have the matter addressed at a shareholders meeting in April or May, before the annual meeting scheduled for June. Stakeholders that have held shares conferring at least 3% voting rights for six months or more have the right to request that a meeting be called under Japanese corporate law. The coalition in effect controls a stake exceeding 3%, according to an executive at one of the investors.
The spotlight will be on how Lixil's non-Japanese shareholders, which account for about 40% of the total, respond to the campaign. A proposal to dismiss an executive officer would need a simple majority to pass a shareholders meeting. Investors often request dividend payouts or the appointment of new directors, but rarely seek to replace top managers outright.
Lixil directors may decide whether to convene the extraordinary shareholders meeting at a board meeting scheduled for Monday. Should the board refuse, the investors could file in court for the right to call a meeting.
Last month, Lixil published the results of a probe into the leadership shuffle by a team including outside lawyers. Though it said the company's actions were ultimately legal and valid, it noted that Ushioda's actions could invite misunderstanding.
The report says that Ushioda convened the nominating committee based on his characterization that Seto was willing to step down, despite Seto having no desire to do so. Ushioda also told Seto his dismissal would be difficult to overturn because it was based on the consensus of the nominating committee.
At an informational session this month, stakeholders urged Lixil to redo the executive change, and criticized the nominating committee's decision to select one of its own members for top leadership as a conflict of interest.
Lixil did not respond to Nikkei's questions on the matter by publication time Tuesday.
In the past, Japanese businesses, including wig maker Aderans and education company Gakken Holdings, have faced calls from investors to replace top leaders. Aderans eventually had its president and most of its board ousted under pressure from a U.S. hedge fund.
Marathon's portfolio of international investments includes about 1.6 trillion yen ($14.4 billion) worth of Japanese stocks, including in West Japan Railway.