Session 6: Interactions between Management and Investors

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1 Over Years Years of of Leadership in in Corporate Governance Japan Society of Northern California Corporate Governance Conference 2013 Leadership Expertise Integrity Leadership Expertise Integrity Session 6: Interactions between Management and Investors Marc Goldstein, ISS October 18, 2013 ISS Institutional Shareholder Services Inc.

2 Degrees of Engagement The higher up the pyramid, the less common the event Proxy Contest Shareholder Proposal, Vote No Campaign One-on-One Meetings/Phone Calls Active Proxy Voting ISS Institutional Shareholder Services Inc. 2

3 Who Owns Japanese Companies? ISS Institutional Shareholder Services Inc. 3

4 Support Rates for Japanese Meeting Proposals 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% <60% <70% <80% <90% (Source: ISS) ISS Institutional Shareholder Services Inc. 4

5 Support Rates by Market Capitalization over JPY 1 tn JPY 500 bn to 1 tn JPY 100 bn to 500 bn JPY 50 bn to 100 bn JPY 10 bn to 50 bn less than JPY 10 bn 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % 80-90% 70-80% 60-70% <60% (Source: ISS) ISS Institutional Shareholder Services Inc. 5

6 Support Rates vs. Percentage of Foreign Ownership 100% 95% Average Support Rate 90% 85% 80% 75% 70% 0-10% 10-20% 20-30% 30-40% 40-50% 50%> Percentage of Foreign Ownership (Source: ISS) ISS Institutional Shareholder Services Inc. 6

7 Support Rates for Top Executives at Companies with All-Insider Boards 95% 94% 93% 92% 91% (Source: ISS) ISS Institutional Shareholder Services Inc. 7

8 Poison Pill Support Rates at Japanese Companies 82% 81% 80% 79% 78% (Source: ISS) ISS Institutional Shareholder Services Inc. 8

9 In the US, Director Support Remains at Record High Levels 2013 Average Support for R3K* Nominees is 95.56% 48 Sub-majority Votes at 31 Companies To Date 439, 2.76% 147, 0.92% 77, 0.48% Support 1130, 7.10% 48, 0.30% 90%+ 80%-90% 70%-80% 60%-70% 14075, 88.43% 50%-60% <50% *Based on results for 15,916 nominees at 2,594 Russell 3000 firms ISS Institutional Shareholder Services Inc. 9

10 2013 US Say on Pay Support Distribution Russell 3,000 Non-Russell 3,000 Source: ISS Voting Analytics, covers companies through July 1, 2013 ISS Institutional Shareholder Services Inc. 10

11 Top 12 Shareholder Proposals (US) Issue Pending Voted Average Support* Majority Votes Total on Ballots #1 Independent Board Chair 3 (1 W/D) % 6 62 #2 Political Contributions % (CPA: 32.2%) 1 48 #3 Lobbying Disclosure 1 (1 W/D) 39 26% 1 41 #4 Holding Periods 0 (3 NP) % 0 39 #5 Repeal Classified Board 1 (2 NP) % #6 Majority Voting % #7 Pro-rata Vesting % 0 30 #8 Written Consent % 3 27 #9 Simple Majority Vote % #10 Proxy Access % 5 15 #11 Sustainability Reports % 1 14 #12 Special Meetings % 4 11 * Votes cast for and against; W/D Withdrawn; NP Not presented/considered ISS Institutional Shareholder Services Inc. 11

12 E&S Proposal Average Vote Results (US) 25.00% Average Vote Results for all E&S Proposals % 18.1% 20.2% 18.9% 21.1% 15.00% 12.0% 12.1% 12.5% 15.0% 14.0% 16.3% 10.00% 7.4% 7.6% 8.7% 9.4% 9.8% 5.00% 0.00% Source: ISS Checklist Source: ISS Voting Analytics ISS Institutional Shareholder Services Inc. 12

13 Netherlands USA Germany Switzerland Canada Sweden New Zealand China Australia United Kingdom India South Korea Singapore Mexico Malaysia Thailand France Italy Hong Kong Brazil Japan* Global Comparison of Board Independence Average % of Board Independence * 0.2 percent of Japanese boards are majority independent % of Majority Independent Boards (Source: ISS) ISS Institutional Shareholder Services Inc. 13

14 ROE Comparison among markets ( ) Japan US Europe Other areas Average ROE Max Min Volatility Government bond yield Difference between ROE and government bond yield (Source: Naoki Kamiyama, July 2013 edition, The Securities Analysts Association of Japan Journal) ISS Institutional Shareholder Services Inc. 14

15 Questions & Answers Marc Goldstein Head of Research Engagement Service Expertise Global Coverage Capabilities Quality ISS Institutional Shareholder Services Inc. 15