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Sapporo Shareholders Reject Outside Board Candidates

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By Alison Tudor

TOKYO—Shareholders of Japanese beer maker Sapporo Holdings /zigman2/quotes/200413497/delayed JP:2501 +4.22% Ltd. rejected the slate of directors proposed by U.S. fund Steel Partners on Tuesday, the latest setback for critics who say Japanese companies could use more independent boards.

Sapporo shareholders voted to keep all 10 incumbents. New York-based Steel Partners' slate didn't include President Takao Murakami or five other incumbents.

Steel Partners, which started investing in Sapporo in 2004 and now owns about 18%, has criticized the company for poor management and underperformance. "Steel Partners will continue to take whatever steps it deems necessary to bring positive change to Sapporo, Managing Partner Warren Lichtenstein said in a statement.

Sapporo is losing market share in Japan, with its sales of beer and malt beverages down 36% by volume since 2001.

Sapporo has argued that it has taken moves that will yield returns, such as a capital alliance with beverage maker Pokka Corp. and its diversification into the yogurt and chilled food markets. In a statement, Mr. Murakami said about 70% of shareholders attending the annual meeting voted in favor of keeping the current board lineup.

Sapporo is among a number of Japan companies that corporate governance experts criticize for their lack of diversity, disclosure and independence. Steel Partners' slate won backing from financial consulting firm RiskMetrics Group and proxy advisory firm Glass Lewis & Co.

Others recently criticized include Toyota Motor /zigman2/quotes/200537742/composite TM +1.65% Corp., which is struggling to rebound from quality issues, and Fujitsu /zigman2/quotes/208459594/delayed JP:6702 -1.96% Ltd., which has faced disclosure issues.

Observers say a lack of independent directors stems in part from the different function boards serve in Japan. At traditional Japanese companies the boards run the business, while boards in the U.S. and other places oversee management.

About 55% of companies listed on the Tokyo Stock Exchange have no outside board directors, according to a recent study by the bourse.

"The premise of an all-insider board in Japan is that no one from outside the company could possibly understand the business as well as a lifelong employee," said Marc Goldstein , head of research engagement at RiskMetrics Group.

Corporate governance experts suggest Toyota may have handled its global recall to fix sudden acceleration more successfully if its board members had more diverse backgrounds.

"It is possible that Toyota's governance structure—with the decision-making process highly concentrated in the Japanese headquarters despite its world-wide operations, as well as its 29-member, all Japanese, all insider board, has contributed to the scope and extent of this problem," said James Hawrylak , head of Asian marketing and operations at Glass Lewis.

In hearings in the U.S. over Toyota quality lapses, some lawmakers questioned why the company didn't have any Americans on its board.

Toyota has moved in recent weeks to enable more employees on the ground to make decisions. Toyota President Akio Toyoda has said it will consider promoting more foreigners to executive positions, though it is unclear whether that would include board positions.

Some companies expanding beyond Japan's mature market are looking to foreign talent. Tokyo-headquartered Nomura Holdings /zigman2/quotes/207276383/composite NMR +1.04% Inc. surprised Japan watchers earlier this month by admitting a foreigner, Indian-born Jasjit "Jesse" Bhattal, to its top decision-making body for the first time. Nomura is striving to transform itself into a global investment bank after acquiring the overseas operations of failed Wall Street firm Lehman Brothers in 2008.

Hiroyuki Kachi contributed to this article.

Write to Alison Tudor at alison.tudor@wsj.com

/zigman2/quotes/200413497/delayed
JP : Japan: Tokyo
¥ 1,927.00
+78.00 +4.22%
Volume: 334,500
Aug. 4, 2020 3:00p
P/E Ratio
N/A
Dividend Yield
2.18%
Market Cap
¥144.03 billion
Rev. per Employee
¥66.04M
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/zigman2/quotes/200537742/composite
US : U.S.: NYSE
$ 122.94
+2.00 +1.65%
Volume: 104,343
Aug. 4, 2020 1:33p
P/E Ratio
9.20
Dividend Yield
2.93%
Market Cap
$165.04 billion
Rev. per Employee
$737,463
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/zigman2/quotes/208459594/delayed
JP : Japan: Tokyo
¥ 14,030.00
-280.00 -1.96%
Volume: 922,400
Aug. 4, 2020 3:00p
P/E Ratio
16.57
Dividend Yield
1.43%
Market Cap
¥2865.52 billion
Rev. per Employee
¥28.38M
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/zigman2/quotes/207276383/composite
US : U.S.: NYSE
$ 4.86
+0.05 +1.04%
Volume: 55,527
Aug. 4, 2020 1:32p
P/E Ratio
8.18
Dividend Yield
3.32%
Market Cap
$14.49 billion
Rev. per Employee
$597,075
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