ISS, Glass Lewis Back Fir Tree’s Director Nominees at JR Kyushu - CorpGov
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ISS, Glass Lewis Back Fir Tree’s Director Nominees at JR Kyushu
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ISS, Glass Lewis Back Fir Tree’s Director Nominees at JR Kyushu

By John Jannarone

Both of the leading proxy advisory firms, which many institutional asset managers use as a guide for shareholder votes, have backed new director nominees at Kyushu Railway Company (JR Kyushu) submitted by 6.1% shareholder Fir Tree Partners.

Glass, Lewis & Co recommended shareholders vote for all three of Fir Tree’s independent director nominees, Fumiyo Takei, Daizo Motoyoshi and Yoshiko Nagao, while urging votes against Masayoshi Nuki and Izumi Kuwano. Institutional Shareholder Services Inc. (ISS), meanwhile, recommended shareholders vote for Ms. Takei and Mr. Motoyoshi and against Ms. Kuwano and Kazuhide Ide.

The recommendations come as Fir Tree engages in its second proxy fight with JR Kyushu, which, as CorpGov outlined in a recent analysis, appears slow to embrace modern standards of corporate governance. A key question in coming days ahead of the June 23 meeting is whether BlackRock, Inc., JR Kyushu’s largest shareholder, will side with the company or follow the proxy advisors’ suggestions. Last year, the proxy advisors also backed Fir Tree but BlackRock did not. A spokesman for BlackRock declined to comment.

In its recommendation materials, Glass Lewis said “[t]his circumstance leaves the distinct impression JR Kyushu may have had little legitimate interest in considering Fir Tree’s candidates beyond simple optics management. Instead, it appears the Company was more interested in cycling through a preamble of nominal governance gestures before advancing yet another independent candidate ill-equipped to fully evaluate the still simmering strategy and performance issues raised at the 2019 meeting, or the withering implications of the COVID-19 crisis which will undoubtedly inform the 2020 meeting. Under these conditions, we believe there is ample cause to support Fir Tree’s nominees, which appear to offer considerably greater skill, expertise, and independence than certain of JR Kyushu’s incumbent nominees.”

ISS made similar observations about the relative qualities of Fir Tree’s nominees, comparing them specifically to Ms. Kuwano, an innkeeper who has been on the board for many years.

“[W]e note that Fumiyo Takei brings real estate investing and financing experience from two listed companies; her addition would also contribute to gender diversity on the board,” ISS said in its recommendation. “Daizo Motoyoshi brings an investor perspective to the board given his background as portfolio manager. Given how critical real estate and capital allocation is for the company, this appears as a reasonable solution to ensure proper evaluation of capital allocation alternatives by independent members of the board. To create an open position for a second dissident nominee, we recommend a vote against management nominee Izumi Kuwano, one of the longest serving independent directors on the board, whose prior experience appears to be limited to managing a small hotel company.”

JR Kyushu and Fir Tree couldn’t immediately be reached for comment.


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