An activist fund manager takes aim at Japan’s revolving door

An activist fund manager is shining a spotlight on a long-established Japanese business practice: senior officials from the country’s establishment landing plush post-retirement jobs in the private sector.

Tsuyoshi Maruki, the founder of Strategic Capital Inc., is taking aim at Japan Securities Finance Co., a Tokyo-based provider of loans and securities lending services. JSF has a long history of appointing former Bank of Japan officials to top management positions, he said.

According to Maruki, this arrangement is detrimental to the company’s performance, as the people in question have no incentive to boost shareholder value. He argues that such employees tend to see their positions as no more than cushy jobs.

“It’s unusual to see so many former officials dominate the management of one company,” Maruki said in an interview.

This kind of hiring happens in many countries. In Japan, it’s known as “amakudari,” which means descent from heaven, and has been around for decades. It has long been criticized as outmoded and unhealthy. JSF is far from unique in adopting the widespread practice. It happens not only for central bank officials but also, for example, employees of the country’s government ministries.

Strategic Capital isn’t calling for JSF to stop hiring former BOJ officials. Instead, it’s submitting a shareholder proposal for the company’s annual general meeting scheduled for June, asking for it to disclose the salaries of its president and other former BOJ executives.

Shigeki Kushida, JSF’s president, is a former executive director of the central bank. Chairman Eizo Kobayashi is also a former BOJ official. Historically, the company’s presidents have come from the bank, according to Maruki.

Kenji Ishiyama, a deputy manager in JSF’s corporate governance office, declined to comment.

JSF shares have fallen 5.4% this year, compared with a 5.8% drop in the benchmark Topix index. The company has a market value of about ¥87.1 billion ($680 million).

Maruki isn’t the first investor to question the practice in Japan.

Lim Advisors submitted a shareholder proposal to Heiwa Real Estate Co. last year calling for the company to ban the appointment of former Tokyo Stock Exchange officials to its board due to a possible conflict of interest. Heiwa Real Estate owns the building that houses the Tokyo bourse and has regularly selected former TSE officials as executives or directors. The proposal didn’t pass.

Maruki founded Strategic Capital in 2012. He previously worked with Yoshiaki Murakami, considered one of the earliest champions of shareholder rights in Japan, but parted ways after Murakami was convicted of insider trading and received a suspended sentence. Before that, Maruki worked for Nomura Securities Co. for 17 years.