For decades, boards allowed former executives to linger on as highly paid advisers, without offering shareholders much detail about their roles. Now, there are signs that cushy retirement gigs may no longer be a sure thing.
Japan’s largest drugmaker, Takeda Pharmaceutical Co., in an unusual letter to shareholders this month, said retiring Chairman Yasuchika Hasegawa will stay on as an adviser — but getting only 12 percent of his current compensation with no bonus, corporate car or full-time secretary. The company also emphasized that he would play a limited role in executive decisions.
Takeda issued its statement detailing Hasegawa’s pay and the reasons for him to stay on after a group of 15 unnamed shareholders put in a proposal against having advisers and demanded that the company seek the approval of investors before making such appointments. Having former executives in advisory roles allows them too much influence over corporate decisions, the group argued. The shareholder proposal will come up for vote at the Takeda annual meeting on Wednesday.
While the 236-year-old drugmaker is among the first Japanese companies to put out such an edict, others will probably have to do the same thing. The government will issue disclosure rules this summer for former presidents and chief executive officers who serve as advisers, according to documents earlier this month from an investment panel led by Prime Minister Shinzo Abe.
The changes come as more shareholders demand transparency for the salaries and roles of former executives, who have often wielded power even after relinquishing their formal positions.
Takeda’s letter on Hasegawa, 71, described what people want to know in a very simple form and the level of disclosure is highly welcome, said Hiroharu Fukasawa, a senior researcher at Ernst & Young Institute Co. in Tokyo, which specializes in corporate governance.
“It’s very rare for a Japanese company to put out a letter like this,” said Fukasawa. “The best option is not to have an adviser, but if a company chooses to have one, there should be a disclosure like this case.”
Companies on the 225-issue Nikkei average have the lowest median proportion of independent directors and female directors as well as the oldest average age (63.1 years) among developed-market peers, Bloomberg Intelligence estimated in January.
Some of the nation’s largest companies have already ended the practice of adding such advisory roles. Sony Corp. did so in 2006, and Tokyo Electric Power Company Holdings Inc. followed suit in 2012, a year after the nuclear disaster at one of its plants in Fukushima Prefecture. The former chairman would be the first such adviser at Takeda in 13 years.
“We understand there are some shareholders and investors who have concern that Mr. Hasegawa may continue to influence Takeda’s business judgment and decision making even after this retirement from our board,” Takeda’s CEO Christophe Weber wrote in the company’s letter. Hasegawa no longer attends executive team meetings and has fully delegated business operations to the leadership team, he wrote.
Hasegawa will assume the position of corporate counselor for the next two years. In another unusual step, the letter also laid out the work that Hasegawa would be doing, saying that he would mainly represent the company at industry bodies and would only be involved in providing advice when management requested it.
Earlier this month, investment firm Standard Life PLC warned Japanese companies it would vote against boards where independent directors aren’t at least a third of the board from next year.
Under Hasegawa, Takeda appointed two independent, outside directors for the first time in 2011. He also hired Weber, the company’s first non-Japanese chief executive officer. At the annual general meeting, Takeda plans to appoint five independent directors on its board of nine people. The company will have four non-Japanese executives on the board, which is rare in the country.
“Weber’s letter is a response to the shareholders proposal and a part of our activities to increase transparency in corporate governance,” said Kazumi Kobayashi, a Tokyo-based Takeda spokesman.