April 25, 2018
Bloomberg reported (article here) that on April 18, 2018 (Tokyo time), Dalton Investments delivered a minority shareholder proposal to the Board of Directors of Shinsei Bank, Limited (the “Bank”), a company held in the accounts of various Dalton clients. Further to Dalton’s core investment principles of “alignment of interest,” the proposal requests the creation of a restricted stock compensation system for bank directors, and requests approval at the Bank’s annual general meeting of shareholders, set for June 2018. The proposal is the culmination of dialogue with the Bank going back to the letter Dalton delivered to the Bank on March 23, 2017, available here. This effort continues Dalton’s commitment to corporate engagement in Japan, starting with the management buyout of Sun Telephone in 2006, and continuing through Dalton’s acceptance of the Japan Stewardship Code in 2016, and a Dalton team member joining the board of directors of Prestige International also in 2016.
“Constructive corporate engagement continues to be an important way for Dalton to add alpha for our clients invested in Japan and the rest of the world,” portfolio manager James Rosenwald III said of the proposal. “We believe that a strong alignment of interest between Board Members, Senior Management and Shareholders will improve long-term outcomes. Dalton’s goal is to increase the Bank’s shareholder value which will benefit all shareholders but, most importantly, will allow the government’s stake in Shinsei to appreciate. This will, in time, allow the government and Japanese taxpayers to profit from the Bank’s improved performance. Therefore, we encourage Shinsei Bank shareholders to support the distribution of restricted shares, instead of cash compensation, in order to improve the alignment of interests among all parties.”
Following receipt of Dalton’s proposal, the Bank introduced its own proposal on April 23, 2018 to create a restricted stock compensation plan. That proposal is located here on the Bank website. However, the Bank’s proposal is for a far more modest award of restricted stock to bank directors – specifically, 10% of Dalton’s proposed amount; therefore, Dalton is continuing to pursue its own proposal, as confirmed in Dalton’s response letter to the Bank dated April 24, 2018, attached to the proposals below.
For the official Japanese language version the proposal, please see here. For the English version, please see here.
Dalton Investments LLC is a value-focused investment management firm with expertise in Asia equities, global equities and fixed income. Headquartered in Los Angeles, with a subsidiary office in Tokyo, Dalton manages $3.8 billion (December 31, 2017) in actively managed long-only and long/short strategies for pensions, endowments, foundations, financial institutions and family offices.