Japan Asset Managers Back Corporate Governance Push, Oasis Founder Says

Japanese asset managers are increasingly supporting the targeting of poorly performing firms by activist fund Oasis Management, its founder said, paving the way for more campaigns to improve corporate governance and deliver higher shareholder returns.

Hong Kong-based Oasis, which does not publicly declare its assets under management, has launched high profile campaigns against at least six Japanese companies in the past year demanding changes at those targets.

"Our best allies are domestic asset managers who today see bad corporate governance as shameful," Seth Fischer, Oasis' founder and chief investment officer, said.

The change heralds a potential paradigm shift in Japan's corporate world, with domestic asset managers backing activist engagement that could reshape corporate practices in the country. Oasis is among the most prominent activist investors operating in Japan with recent targets including the country's largest drugstore chain, Ain Holdings, and Kao, the world's second-largest cosmetics firm by revenue, according to LSEG data.

The Tokyo Stock Exchange and Japanese government have encouraged firms to improve their corporate governance and capital allocation over the past decade, as they look to lure more global investors.

Measures such as appointing external directors with relevant business experience and adopting key performance indicators in line with global peers have helped Japan's Nikkei rally 22 per cent in 2024 to an all-time high and captured the attention of global investors, he said.

"All of a sudden Japan's back on the radar. I'm fielding calls from more people than ever before," he said. Fischer said only 20 per cent of Oasis's engagement with Japanese companies to agitate change becomes public.

"Every single time we've asked the company nicely, privately. When they just don't engage, they hide, they obfuscate, they lie, they pretend we don't exist, they ignore shareholders, their returns continue to diminish, they don't perform, right?," he said.

"Then the board's failing in a job of supervising management and then we have to engage...I'm not shy. We're not shy about doing this."

Oasis scored a major win in 2023 when three outside directors at elevator maker Fujitec were replaced by four candidates chosen by Oasis, after which the board voted to oust its chairman.

Oasis, Fujitec's largest shareholder at the time, had criticised the chairman's family's control over the company.

While Japanese companies are doing away with particularly egregious corporate governance malpractice, such as nepotism in hiring and the misappropriation of corporate assets, "check the box governance is not enough," said Fischer.

Boards must hold management to account for all aspects of business performance, including digital transformation and marketing, return on equity, and performance benchmarked against competitors, he added.

There is now a much deeper pool of independent director candidates with real management experience. Oasis used to call upon the same few people to nominate to boards, but now it speaks to up to 100 candidates each time, Fischer said.

Oasis has been active in Japan since its establishment in 2002, and while tangible progress has been made, Oasis has lost money in some cases where it could not effect change - poor governance persisted and the management remained unaccountable, continuing to destroy the company's share value.

"I think in five or 10 years time, people will be shocked at what even went on in 2024, much less what went on in 2013."