Proxy firms split over activist investor's plan for Japan's Kuroda Elec

[August 11, 2015] By Thomas Wilson

TOKYO (Reuters) - Major U.S. proxy advisory firms are split over a proposal linked to activist investor Yoshiaki Murakami to shake up the board of Japanese mid-sized electronics parts maker and trader Kuroda Electric, leading to uncertainty over the move's outcome.

C&I Holdings, which is affiliated with Murakami, and Minami Aoyama Real Estate have called for the election of four new directors at Kuroda Electric at an extraordinary shareholders' meeting on August 21, citing the need to improve investor returns and boost growth.

Kuroda Electric is the latest Japanese firm to be targeted by activist investors pushing for better returns and corporate governance reforms. Others, including major electronics companies Sony and Nintendo, have found themselves in the sights of dissident investors in recent years.

Murakami, who owns a 9.3 percent stake in Osaka-based Kuroda, is among the board nominees. He is also the father of C&I's president. C&I and Minami Aoyama own a combined 6.5 percent stake, according to Thomson Reuters data.

The proposed directors would seek a shareholder return ratio of 100 percent for the next three years, C&I and Minami Aoyama said in a letter to shareholders in June. The letter cited low returns, poor capital policies and a lack of merger and acquisition-based growth as reasons for the proposal.

Kuroda last month raised this year's dividend forecast following pressure by Murakami, who was given a suspended prison sentence for insider trading in 2011.

But C&I's proposal has led to conflicting recommendations from ISS and Glass Lewis.

ISS advised shareholders to support the nominees, who it said would provide "new insights on industry conditions and balance sheet management" currently lacking at Kuroda. ISS played down Murakami's conviction, saying there were no legal hurdles to his appointment.

Kuroda disagreed with ISS's recommendation, urging shareholders on Monday to vote against the proposed candidates because of Murakami's conviction and family affiliation with C&I.

For its part, Glass Lewis recommended shareholders vote against the plan. C&I had an "unconvincing case" for modifying the board, and proposals to bolster shareholder returns hinge on a "rigid and extreme dividend policy," it said.

Kuroda on Tuesday called the advice "fair" and urged its stockholders to refer to it when voting.

The proxy advisers have previously given conflicting recommendations. Glass Lewis said in June that Toyota's "Model AA" share plan would give the automaker more flexibility. ISS said it would erode fiscal discipline.

(Reporting By Thomas Wilson; Editing by Muralikumar Anantharaman)

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