Strategic Capital uses new legal tactics to challenge Japanese corporate governance

Strategic Capital, led by Tsuyoshi Maruki, is employing unconventional tactics to challenge Japanese corporate governance by utilizing Article 160 of the Companies Act. This method aims to bypass controlling parent companies or major shareholders to allow minority shareholders to vote on special resolutions, a concept known as 'Majority of Minority' (MOM).

In recent shareholder meetings, the firm targeted several companies, including Ganho Online Entertainment, Osaka Steel, Keihanshin Building, and Goldcrest. For instance, at Osaka Steel, excluding the voting rights of the parent company, Nippon Steel, resulted in a 62.59% approval rate for a proposal, nearing the two-thirds threshold required for special resolutions.

Legal experts, including Hideaki Kubori of Hibiya Park Law Office and Professor Tatsuo Uemura, have expressed concerns regarding the rise of activist investors in Japan. They argue that while shareholder value is important, the current legal environment may allow certain activists to act in ways that destabilize corporate governance or resemble historical 'meeting blackmailers' (sokaiya). They advocate for a return to fundamental principles to ensure a healthy management environment where legitimate companies can thrive.