About 30 percent of companies listed on the Tokyo Stock Exchange that close their books in March — 696 firms — hold annual shareholders meetings on Thursday, making it the peak day. In the past, what often drew people’s attention to such meetings was the presence of sokaiya racketeers who owned a few shares in the companies so they could attend and extorted money from the management in return for not making any trouble. These days, attention is focused on the roles played by major shareholders such as institutional and foreign investors, whose exercise of their voting rights sway the approval of management proposals.
In this situation, individual shareholders should also take their roles seriously. These people mostly remain mute at the meetings of the companies whose shares they have bought, except when the firms are embroiled in well-publicized scandals or management troubles. Most of these shareholders are believed to own stakes in the companies either for dividend payments or capital gains when the shares go up. However, they should realize that shareholders meetings are not just annual ceremonies but provide good opportunities for them to evaluate the management of the firms and prod them to improve their performance.
According to the Japan Securities Dealers Association, there were a record 18.1 million individual shareholders at the end of fiscal 2015, holding about 17 percent of shares in listed companies in value terms. Several factors have contributed to the increase — the spread of online stock transactions, the introduction in 2014 of the Nippon Individual Savings Account, in which individual investors will be eligible for tax exemptions on their financial gains if the annual investment is ¥1.2 million or less, and the 2015 listing of the three firms under Japan Post Holdings Co. that drew strong investor attention.
Usually, an investor who has 100 or more shares in a company can attend its annual shareholders meeting and exercise the right to vote. Some firms set the minimum at 1,000 shares. The number of votes an investor can cast is determined by the number of shares that person holds. In a typical shareholders meeting, the company president serves as the chair, announces business and audit reports, and explains the outline of the firm’s performance. The chairperson then explains matters that must be decided by the shareholders’ votes. Each agenda item is put to the vote when the chair judges that the shareholders and executives have devoted enough time to questions and answers.
Under the rules of stock exchanges, listed companies are required to conform to the corporate governance code, which among other things calls for dialogue between management and shareholders. Shareholders meetings in recent years have taken up such matters as remuneration for executives as well as functions of outside directors and advisers, matters deemed important from the viewpoint of corporate governance. In many cases, however, such agenda items are quickly approved through the endorsement of major shareholders.
Given that transparency in corporate management is increasingly being required, individuals are encouraged to take the trouble of attending shareholders meetings and making themselves heard by exercising their right to vote. If they are not convinced by the proposals from management, they should have the courage to vote against them. Even if they may not have enough votes to change the management’s plans, their questions and remarks will play a meaningful role in making the shareholders meetings more open and pressing for greater transparency on the part of management. It should be noted that about a half of the listed companies enable shareholders to vote online, so that they can express themselves without physically attending a meeting.
It may be hard for individual shareholders to determine whether the companies in which they invest are properly operated. Still, they can at least bring their viewpoint as consumers in scrutinizing management, which may be difficult for insiders to do. Management should take their opinions seriously and take the time to respond with adequate explanations. To help individual shareholders become familiar with and fully digest the planned agenda, management should send notices for meetings sufficiently in advance, so that shareholders will have enough time to study the issues at hand. Well-prepared individual shareholders should be able to make constructive contributions at meetings.
There was a time in the 1990s when more than 90 percent of the TSE-listed firms held their shareholders meetings on the same day. This concentration has since been reduced and it is now easier for shareholders to attend more meetings. Shareholders should take advantage of the improved conditions for taking part in those meetings.