Nomura Holdings Inc.’s besieged chief executive won a shareholder vote Monday, surviving a call for his ouster from the board following an information leak.
CEO Koji Nagai was re-appointed at an annual shareholder meeting alongside nine other nominees proposed by the company, Japan’s biggest brokerage said in an emailed statement. The vote was held almost a week after Nomura announced several moves to placate investors following the leak and recent losses, including governance changes and a $1.4 billion stock buyback.
But those reforms — particularly tweaks to how it selects its top executives — are also likely to weaken the influence of management over who eventually succeeds Nagai, the bank’s longest-serving CEO in three decades.
By stripping Chairman Nobuyuki Koga of his role as head of the key nomination committee in favor of an external director, Nomura may break from the traditional way that Japanese financial firms choose their leaders when the time comes for Nagai to step down. That could be just what the loss-making brokerage needs to meet its long-term challenges, according to Morningstar Inc. analyst Michael Makdad.
“Rather than Nagai or Koga having a large say in who will be the next CEO, Nomura will try to have a selection process that is as independent as possible,” Makdad said. “It is possible the company would choose a candidate open to a broader range of strategic moves than if it chose a protege of Nagai who might defer to some degree to the opinions of former CEOs.”
Like most of its Japanese peers, Nomura has tended to choose its CEO from a close circle of senior executives who are groomed by management after rising through the ranks. Now more of that responsibility will fall to outside director Hiroshi Kimura, a former Japan Tobacco Inc. chief.
Revelations last month that employees leaked market-sensitive information led to regulatory penalties and prompted proxy advisory firm Institutional Shareholder Services to recommend voting against Nagai’s re-appointment.
Nomura is not the only Japanese company facing difficult shareholder meetings this season as the government’s corporate governance reforms give investors a bigger voice. Nissan Motor Co. faces opposition to its CEO’s re-appointment after the arrest of former Chairman Carlos Ghosn, while activist shareholders are pressing for change at housing materials maker Lixil Group Corp. and rail operator Kyushu Railway Co.
Now that Nagai has been re-appointed, his immediate priority will be to implement his plans to cut costs at its struggling global wholesale operation and shut retail branches at home following the company’s first fiscal-year loss in a decade.
In an April interview, he signaled that he may step down before the completion of the three-year overhaul as long as it goes smoothly.
The jury is still out on whether his eventual successor can address Nomura’s difficulties in an industry that is grappling with big changes, said Travis Lundy, a special situations analyst who publishes on Smartkarma.
“It could be good for Nomura to be influenced by an outsider,” Lundy said. “The question would really be whether an outsider could do it better. It is a tough business.”
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