Shareholder meetings of companies that closed their books in March are over. The peak day saw 1,457 companies holding meetings. At many of the meetings, investment funds saw their proposals, most of them calling for payment of higher dividends, killed one after another due to opposition from other shareholders.

On the other hand, many companies succeeded in having takeover-defense plans approved. Although investment funds did not get their own way in many cases, company executives cannot sit idly by. Such funds are likely to be active at future shareholder meetings. Company executives will need to prepare themselves to deal persuasively with their proposals.

In response to the legalization May 1 of the so-called triangular merger — which changes the Japanese corporate environment by enabling a local subsidiary of a foreign company to use shares in its parent to purchase a Japanese company — 210 companies successfully moved to get plans for takeover-defense measures approved at their shareholder meetings in late June.

As the presence of investment funds became more apparent, the weight of individual shareholders increased from the viewpoint of management. Bull-Dog Sauce Co., facing an unsolicited takeover bid by New York-based hedge fund Steel Partners, changed the date of its shareholder meeting to a Sunday so that many individual shareholders could attend. The company’s proposal to launch a defensive measure to fend off the takeover bid was supported by more than two-thirds of the vote.

Some companies, including Tokyo Broadcasting System Inc., are moving to increase share-crossholding with other companies to defend themselves. Such a move, however, could deprive management of incentives to renovate business operations.

Many shareholders suspect that investment funds lack a long-term business strategy and are looking only for short-term profits, although there is also a report that some investment funds have made reasonable proposals from a long-range viewpoint. At any rate, their presence is likely to make executives rethink their way of doing business.

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