Loeb victory may prove hollow

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TOKYO / Reuters

Activist investor Daniel Loeb claimed success after the surprise exit of convenience store pioneer Toshifumi Suzuki as CEO of Seven & i, saying it was a step forward for corporate governance in Japan, but his victory may turn out to be pyrrhic.
The sudden departure of its 83-year-old patriarch left the $90 billion retail conglomerate without a clear succession plan at a time when it has yet to turn around its ailing supermarket business.
Suzuki abruptly announced his resignation after failing to garner enough support from the company’s board to replace the head of its profitable convenience store chain, Seven-Eleven Japan — a rare challenge to his authority in country whose corporate culture is usually deferential.
A legendary figure in the retail industry who brought the 7-Eleven franchise to Japan in the 1970s, Suzuki told reporters he was so stung by it that he decided it was time
to go.
“I have never been rejected on personnel and other matters,” he said.
Loeb, who has agitated for change at companies ranging from auction house Sotheby’s to Yahoo Inc, recently wrote an open letter to shareholders voicing concerns over rumours Suzuki planned to appoint his son to a senior position. Japanese Prime Minister Shinzo Abe has made reforming Japan Inc the “Third Arrow” of his programme to revive the economy, and has been pushing for board members to pay more attention to shareholders rather than rubber-stamping management proposals.
But, while some investors said the upheaval at Seven & i showed boards were starting to embrace better governance, they also worried that Suzuki, for all his strengths, had left the company in disarray.
“Investors have been encouraged by the board’s decision to reject the chairman’s proposal as it shows that governance is working,” said Fumio Matsumoto, senior fund manager at Dalton Capital.
“But with the company’s long-time CEO resigning, investors wonder whether the rest of management has strong decision-making skills.”
Suzuki’s move to replace the president of Seven-Eleven Japan, Ryuichi Isaka, whom Loeb had championed for the top job, laid bare the divisions within the company.
Seven & i’s management was considering proposing a new slate of leaders at a board meeting on April 19, one source familiar with the matter told Reuters. But there are few clear candidates, and analysts said it would be difficult to decide on a replacement, especially after Suzuki had been at the helm for so long.
“There is no denying his great accomplishment. But the biggest problem is a charismatic leader was at the top just too long,” said an independent retail analyst.

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