Over 25 25 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. www.issgovernance.com
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
Who Owns Japanese Companies? ISS Institutional Shareholder Services Inc. 3
Support Rates for Japanese Meeting Proposals 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% <60% <70% <80% <90% 2010 2011 2012 2013 (Source: ISS) ISS Institutional Shareholder Services Inc. 4
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% 90-100% 80-90% 70-80% 60-70% <60% (Source: ISS) ISS Institutional Shareholder Services Inc. 5
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
Support Rates for Top Executives at Companies with All-Insider Boards 95% 94% 93% 92% 91% 2011 2012 2013 (Source: ISS) ISS Institutional Shareholder Services Inc. 7
Poison Pill Support Rates at Japanese Companies 82% 81% 80% 79% 78% 2010 2011 2012 2013 (Source: ISS) ISS Institutional Shareholder Services Inc. 8
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
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
Top 12 Shareholder Proposals (US) Issue Pending Voted Average Support* Majority Votes Total on Ballots #1 Independent Board Chair 3 (1 W/D) 58 31.9% 6 62 #2 Political Contributions 4 44 24.2% (CPA: 32.2%) 1 48 #3 Lobbying Disclosure 1 (1 W/D) 39 26% 1 41 #4 Holding Periods 0 (3 NP) 36 23.8% 0 39 #5 Repeal Classified Board 1 (2 NP) 30 79.4% 29 33 #6 Majority Voting 2 29 59.4% 17 31 #7 Pro-rata Vesting 3 27 33.4% 0 30 #8 Written Consent 0 27 40.9% 3 27 #9 Simple Majority Vote 0 17 71.7% 15 17 #10 Proxy Access 1 14 36.3% 5 15 #11 Sustainability Reports 1 13 33% 1 14 #12 Special Meetings 0 11 44.5% 4 11 * Votes cast for and against; W/D Withdrawn; NP Not presented/considered ISS Institutional Shareholder Services Inc. 11
E&S Proposal Average Vote Results (US) 25.00% Average Vote Results for all E&S Proposals 1999-20.00% 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% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ISS Checklist Source: ISS Voting Analytics ISS Institutional Shareholder Services Inc. 12
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 100 90 80 70 60 50 40 30 20 10 0 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
ROE Comparison among markets (1995-2012) Japan US Europe Other areas Average ROE 3.60 11.44 10.03 10.49 Max. 8.76 15.10 15.51 14.59 Min. -3.01 3.49 2.38 5.26 Volatility 3.47 3.27 3.44 2.79 Government bond yield 1.7 4.8 4.4 4.8 Difference between ROE and government bond yield 1.9 6.6 5.7 5.7 (Source: Naoki Kamiyama, July 2013 edition, The Securities Analysts Association of Japan Journal) ISS Institutional Shareholder Services Inc. 14
Questions & Answers Marc Goldstein Head of Research Engagement marc.goldstein@issgovernance.com +1.301.556.0447 www.issgovernance.com Service Expertise Global Coverage Capabilities Quality ISS Institutional Shareholder Services Inc. 15