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Why is Sekisui House going to hold a meeting of shareholders under the state of emergency?

Too disrespectful to shareholders?

April 20, 2020

JB Press

Tadashi Fujioka


Sekisui House's shareholders' meeting scheduled for April 23, 2020 is being affected by COVID-19.


A shareholder proposal has been made by former Chairman Isami Wada and incumbent Director Fumiyasu Suguro, seeking to replace the current management team.  A new conflict has arisen over whether to hold the shareholders’ meeting under the state of emergency.


While the company pursues to hold the meeting by changing the venue to a smaller meeting room and restricting the number of shareholders joining the meeting, Mr. Suguro has filed a provisional disposition to the Osaka District Court seeking to postpone the meeting.


Sekisui House wants to hold the meeting as scheduled despite COVID-19


On April 7, 2020 a state of emergency was declared in seven cities across Japan, including Tokyo and Osaka, in response to the spread of the coronavirus.  Sekisui House was scheduled to hold an ordinary meeting of shareholders at a hotel in Osaka, but the company did nothing until April 15.


Sekisui House made the following announcement on April 15, 2020:


< We scheduled to hold the 69thth Ordinary General Meeting of Shareholders on April 23, 2020 at Rose Room of the Westin Osaka, but have been notified by the hotel that they cannot let us use the room. >


A short notice of venue change could cause confusion.  The meeting was scheduled to be held in Osaka where a state of emergency was declared.  Given the government's policy of reducing human contact by eight percent, it may be better for Sekisui House to consider postponing the shareholders' meeting which draws many shareholders.  However the company has determined to force the shareholders' meeting.


<The payment of year-end dividend to shareholders (appropriation of surplus) and the Election of Directors and Audit & Supervisory Board Members upon the expiration of their terms of office, which are agendas of the meeting, are required by law to be resolved at the Meeting.  After careful consideration, the Company has decided to conduct the Change and hold the Meeting as scheduled while at the same time the Company will implement as many measures as possible to prevent infection.> (Sekisui House press release)


On April 15, 2020, a statement was released by the Financial Services Agency, Keidanren, and other public and private councils.  The statement said it would seek flexible operations, including postponements, for general meetings of shareholders.


Under the Companies Act, a general meeting of shareholders cannot be canceled without the consent of all shareholders, but can be postponed without the consent.  Under the state of emergency, there is no need to hold an event soon.  Sekisui House’s meeting of shareholders at this time is where an important topic of "governance failure" is to be discussed.  Forcing a shareholders' meeting at a venue where the number of shareholders is restricted could be seen as a problem that ignores shareholder’s rights.


Given that the declaration of a state of emergency was made on April 7, Sekisui House could have easily predicted this problem, but it appears that the company has not studied the possibility of internet-based shareholders' meeting.


The shareholders making the shareholder proposal criticized this as an example of “governance failure.” (Mr. Wada)


One of the reasons why the company is forcing the shareholders' meeting is because the shareholders are fighting a good fight.


Chairman Abe being surrounded by enemies on all sides


The fight began due to a land fraud that took place three years ago.


(please see a related article: “Stormy AGM likely, defrauded Sekisui House”


Chairman Toshinori Abe approved of a land deal with a fraudulent landlord group, and an internal investigation revealed that Mr. Abe should be heavily responsible for the incident.  Chairman Abe however ousted in a coup former Chairman Wada who led the investigation into the fraudulent transaction.


Four representative directors who planned the coup subsequently became very tyrannical, and Messrs. Wada and Suguro made the shareholder proposal in February this year.


Since then, Chairman Abe has refused to deal with any media and remained silent, but Mr. Wada has been very vocal.  Therefore, the land fraud incident gained broad attention once again.  Recently, a Weekly Bunshun article indicating Mr. Abe’s involvement in the fraud and a Weekly Shincho article pointing out the Abe tyranny have been released.


U.S. voting advisory firms have seen the company's governance situation as a problem, and the Institutional Shareholder Services issued recommendations to vote against Chairman Abe and Vice Chairman Shiro Inagaki, and Glass Lewis recommended that shareholders vote against all of the four representative directors including President Yoshihiro Nakai and Executive Vice President Takashi Uchida.


A source says most of the overseas shareholders that account for 30% of Sekisui House's shareholder base are voting for the shareholders.


For those individual and institutional shareholders who have not made voting decisions, the opportunity to ask questions at the shareholders' meeting is important in making decisions.


Certainly, it is somewhat understandable that Mr. Abe wants to carry out the shareholders’ meeting even under the state of emergency.


The shareholders making the shareholder proposal have expressed some concerns.


"In the first place, shareholders are less likely to attend the general meeting of shareholders for fear of infection with COVID-19.  It is not easy for senior people to exercise their voting rights over the internet.  If Sekisui House has its employee shareholders occupy the meeting place so other shareholders cannot join the meeting, the company can finish up the meeting in a smooth manner.  Actually, although the company has prohibited its employees from having any internal meetings because of COVID-19, it has instructed employees to come to the shareholders' meeting.” (Mr. Naoki Matsuoka, a lawyer representing the shareholders making the shareholder proposal)


Sekisui House is incredibly disrespectful to its shareholders


The new venue has been chosen without any consideration to shareholders.  It is in Umeda Sky Building where Sekisui House's head office is located.  It is on the 35th floor of the building.  The shareholders making the shareholder proposal have made an urgent announcement:


"The new venue is on the 35th floor of a building and you need to be tightly squeezed into the confined elevator space to get to the meeting room.  The room has a ceiling lower than the hotel conference room, and is small and confined.  The venue change increases risk of COVID-19 infection."


There is a tax filing office at Umeda Sky Building, and there was a report on April 12 that a tax clerk working there had tested positive for COVID-19.


The announcement has also pointed out the possibility of making shareholders even more nervous by rumors and misinformation.


Mr. Jiro Iwasaki, a dissident slate director who has served as an outside director multiple companies including Renesas Electronics, says:


"The current management's cover-up has been too terrible, and its disrespect to shareholders is something you don't see anywhere else."


Mr. Matsuoka says:


"Sekisui House argues that postponing the general meeting of shareholders will change the record date for shareholders' rights and therefore cause problems with dividend payments.  However, if you conduct a "continuation meeting", which means an extended meeting of shareholders, the problem can easily be solved.   In order to make dividend payments, all you have to do is to approve Proposal No.1 "Appropriation of Surplus".  By forcing the shareholders' meeting on April 23 without doing anything like this, the company is creating risk of infection as well as is disrespecting shareholders' rights.”


The provisional disposition filed to the Osaka District Court of shareholders’ meeting postponement will see its outcome tomorrow, April 21.  It will affect the shareholder voting results.

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