TOKYO & HONG KONG--(BUSINESS WIRE)--Oasis Management Company Ltd. (“Oasis”) is the manager to funds that beneficially own over 16.5% of elevator manufacturer and servicing company Fujitec Co., Ltd. (6406 JT) (“Fujitec” or the “Company”). Oasis has adopted the Japan FSA’s “Principles of Responsible Ownership” (a/k/a the Japan Stewardship Code) and in line with those principles, Oasis monitors and engages with its investee companies. Since our initial investment, we have encouraged Fujitec to strengthen its governance practices, improve its approach to capital allocation, and focus on key markets and business lines to create sustainable value for all stakeholders.
We have aimed to pursue a constructive agenda with Fujitec, as evidenced by our voting behavior in 2021. However, meaningful change clearly did not and has not transpired. Today, Oasis is submitting its request to the Fujitec Board of Directors (“the Board”) to convene an Extraordinary General Meeting (“EGM”) at the earliest possible date to ensure proper and independent oversight is installed without delay. At this EGM, Oasis will seek the removal of all incumbent Outside Directors and the appointment of a truly independent, highly experienced, and diverse set of directors who will elevate Fujitec’s governance and protect the interests of all stakeholders.
Egregious Related-Party Transactions
A key roadblock to progress at Fujitec is the continued control by the Uchiyama Family despite the founding family’s holding dwindling to around 6% in recent years. In May 2022, Oasis published the shocking details of extensive related-party transactions that had occurred between the Company and private entities related to Takakazu Uchiyama, the then long-standing President, and his wider family.
Oasis called on shareholders to Protect Fujitec by exercising their right to vote and hold Takakazu Uchiyama accountable at the 2022 Annual General Meeting (“AGM”).
In spite of the Board’s attempt to absolve the then President of guilt by conducting a patently inadequate internal investigation alongside a compromised law firm, minority shareholder pressure on Fujitec continued, as did interest from the wider market, reflective of the severity of stakeholder abuses committed and facilitated by Fujitec’s Board. Much to the concern of shareholders, alongside this, the Board also made several false and misleading statements, further eroding shareholder and market trust.
Shareholders Silenced, Rights Violated
At the Company’s 2022 AGM, shareholders witnessed truly unprecedented acts that demonstrated the extent to which Fujitec’s governance had been compromised during the reign of Takakazu Uchiyama. In the hours leading up to the AGM, the Fujitec Board decided to egregiously breach shareholders’ most basic right – the right to vote and hold directors accountable -- by removing the proposal to re-elect former-President Takakazu Uchiyama.
Although the action to shield Takakazu Uchiyama from a shareholder vote was egregious, the Board’s subsequent decision to then appoint Takakazu Uchiyama to an unelected Chairman role, and retain pay, served as a shocking demonstration of the depth of entrenchment and complete lack of independent counterbalancing power at Fujitec. The Board, who had publicly committed to improving governance only days before, provided no compelling rationale as to why an executive that shareholders had intended to extricate from Fujitec should continue to be allowed to exert influence over the Company (and be compensated for it). This is particularly controversial given it maintained the Uchiyama Family’s proximity to the Company’s whistle-blowing system, which could severely impact the efficacy of any investigation into misuse of corporate assets.
Notwithstanding these actions to silence shareholders’ voice, public disclosures make clear that no fewer than 40 of Fujitec’s top institutional holders had voted AGAINST the re-election of Takakazu Uchiyama, clearly communicating that Takakazu Uchiyama’s future at the helm of Fujitec was untenable. It is therefore safe to assume that the Board’s decision to withdraw Takakazu Uchiyama’s re-election only served to escape shareholder accountability and deprive shareholders of their most basic right to vote and hold agents accountable.
The Board’s disingenuous rationale for the proposal’s withdrawal masked the level of shareholder discontent and shielded Takakazu Uchiyama from accountability and now only serves to further contribute to lack of trust stakeholders have in the Board, especially with the Outside Directors.
Fujitec’s Outside Directors Have Served Takakazu Uchiyama, Not Stakeholders
The events leading up to the 2022 AGM revealed the seriousness of the governance degradation at Fujitec; however, they also reflected how the former President’s hold on control had meant that those Outside Directors appointed during his tenure served only to maintain that entrenchment.
The conscious efforts of the Outside Directors, including the two new appointments, to maintain this entrenchment has meant that long-term shareholders, and the wider market, now characterize Fujitec as a company that:
- Is controlled by the Uchiyama Family;
- Disregards Shareholder Rights and Opinion;
- Fails to Realise the Company’s Value Potential; and
- Neglects Critical Stakeholder Groups.
Failing to Deliver Against Expected Duties
This complete lack of independent counterbalance on the Board has led to a breakdown between the expectations of shareholders and the actions of the Outside Directors. These expectations include widely accepted governance practices defined by publications including the Japanese Corporate Governance Code, JPX’s “A Handbook on Practical Issues for Independent Directors/Auditors”, and METI’s “Practical Guide for Independent Directors”.
In line with the frameworks of these publications, Oasis believes the current Outside Directors have failed to execute their duties in the following capacities:
- Accommodating the Control of the Uchiyama Family;
- Mis-Managing Business Strategy;
- Using Evasive Tactics; and
- Taking a Lax Approach to Risk Management & Controls.
This collection of failures betrayed the goodwill of many shareholders who supported the Company’s progress as recently as the 2021 AGM. Characterized by the events at the 2022 AGM, the progress made by the Board was exposed as purely cosmetic, and urgent change is needed.
Objectively Inappropriate for the Role
On the day of the 2022 AGM, by choosing to be at the behest of the former-President that oversaw their nomination, the Outside Directors lost all credibility and trust with shareholders, obliterating the already fragile shareholder mandate that they held. The Outside Directors’ poor track record of delivering on their expected duties is substantiated by numerous events that Oasis has witnessed since it first began engaging with Fujitec. Furthermore, the Outside Directors are also objectively weak on experience and skills, and have now proven themselves not to be independent at all.
This combination of an inability to challenge, and a proven track record of failure to adhere to the duties expected of an outside director, shows the effectiveness of Takakazu Uchiyama’s wrongful control over the nomination process. Oasis believes that this conflicted recruitment to the Board, an objective inability to execute the role, and a collective track record of failing shareholders, and other stakeholders, is ample cause to request that the current Outside Directors vacate their seats.
Change is needed now, and so:
OASIS CALLS ON SHAREHOLDERS TO VOTE TO REMOVE THE INCUMBENT OUTSIDE DIRECTORS AT THE REQUISITIONED EGM.
A New Board to Elevate Fujitec’s Governance
Oasis is nominating seven independent, highly experienced, and diverse directors for the Fujitec Board in order to elevate Fujitec’s governance and protect the interests of all stakeholders. Oasis has followed an extensive nomination process that has taken over five months to complete. The directors that have been nominated complement each other as individuals to create a capable and truly independent Board of Directors.
Full nominee biographies can be found in our presentation available at www.protectfujitec.com, alongside a peer comparison of the collective skills and attributes, including on diversity.
The Mandate
There is a clear and broad mandate that new directors would take if elected at the EGM. This mandate would seek to restore lost trust and rebuild market credibility to ensure that Fujitec delivers value to all stakeholders.
With this purpose, the new board would act collectively to carry out the following actions:
- Reform Governance Structures.
- Enhance Business Strategy & Accountability.
- Promote Risk Management & Internal Control.
- Prioritize Stakeholder Management.
The candidates would not be challenging management seats, therefore able to ensure that day-to-day stability and management continuity remained. Notably, three of the nominees have extensive experience in peer elevator businesses, giving a high degree of understanding and expertise to support Fujitec’s management team.
Elevate Fujitec
“We believe all of Fujitec’s stakeholders deserve more. The independent directors that we have assembled over the past five months, each in their own way, will contribute to the long-term value of Fujitec. All those who want to see improved accountability and governance at Japanese companies should vote for these new directors.”
- Seth Fischer, Founder and Chief Investment Officer of Oasis
Full details of Oasis’s proposals are available at www.protectfujitec.com.
We welcome all stakeholders to contact Oasis at info@protectfujitec.com.
About Oasis
Oasis Management Company Ltd. manages private investment funds focused on opportunities in a wide array of asset classes across countries and sectors. Oasis was founded in 2002 by Seth H. Fischer, who leads the firm as its Chief Investment Officer. More information about Oasis is available at https://oasiscm.com. Oasis has adopted the Japan FSA’s “Principles for Responsible Institutional Investors” (a/k/a Japan Stewardship Code) and in line with those principles, Oasis monitors and engages with our investee companies.
Disclaimer
The information contained in this press release (referred to as the "Document") is an information resource for shareholders in Fujitec offered by Oasis, the investment manager to funds that are shareholders of Fujitec (the "Oasis Funds").
This material is not intended to solicit voting in favor of Oasis’ proposals, to which rules concerning solicitation of proxies applies.
Oasis is not in any way soliciting or requesting shareholders to jointly exercise their voting rights together with Oasis. Shareholders that have an agreement to jointly exercise their voting rights are regarded as “Joint Holders” under the Japanese large shareholding disclosure rules, and they must file notification of their aggregate share ownership with the relevant Japanese authority for public disclosure.
Oasis disclaims its intention to be treated as a Joint Holder with other shareholders under the Japanese Financial Instruments and Exchange Act (“FIEA) by virtue of its act to express its view or opinion or other activities to engage in dialogue with other shareholders in or through this Document or any website.
This statement and related materials exclusively represents the opinions, interpretations, and estimates of Oasis in relation to the upcoming EGM. Oasis is expressing those opinions solely in its capacity as an investment advisor to the Oasis Funds.