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Nomura's Besieged CEO Wins Shareholder Vote for Re-Election

Takashi Nakamichi and Takako Taniguchi
(Bloomberg) -- Nomura Holdings Inc.’s under-fire chief executive won a shareholder vote on Monday, surviving a call for his ouster from the board following an information leak.CEO Koji Nagai was reappointed at an annual shareholder meeting alongside nine other nominees proposed by the company, Japan’s biggest brokerage said in an emailed statement. The vote was held almost a week after Nomura announced several moves to placate investors following the leak and recent losses, including governance changes and a $1.4 billion stock buyback.But those reforms -- particularly tweaks to how it selects its top executives -- are also likely to weaken the influence of management over who eventually succeeds Nagai, the bank’s longest-serving CEO in three decades.By stripping Chairman Nobuyuki Koga of his role as head of the key nomination committee in favor of an external director, Nomura may break from the traditional way that Japanese financial firms choose their leaders when the time comes for Nagai to step down. That could be just what the loss-making brokerage needs to meet its long-term challenges, according to Morningstar Inc. analyst Michael Makdad.“Rather than Nagai or Koga having a large say in who will be the next CEO, Nomura will try to have a selection process that is as independent as possible,’’ Makdad said. “It is possible the company would choose a candidate open to a broader range of strategic moves than if it chose a protege of Nagai who might defer to some degree to the opinions of former CEOs.’’Like most of its Japanese peers, Nomura has tended to choose its CEO from a close circle of senior executives who are groomed by management after rising through the ranks. Now more of that responsibility will fall to outside director Hiroshi Kimura, a former Japan Tobacco Inc. chief.Revelations last month that employees leaked market-sensitive information led to regulatory penalties and prompted proxy advisory firm Institutional Shareholder Services to recommend voting against his reappointment.Emiko Iwabuchi, a 70-year-old Tokyo resident who holds Nomura shares, said the incident was discussed at the meeting and the bank should do more to prevent a recurrence. “You shouldn’t make your investors worry,'' she said. ``I want them to do better at educating their employees.”Read more on ISS’s stance against NagaiShares of Nomura closed 0.3% higher in Tokyo. The stock was trading near a six-year low before the buyback announcement triggered an 11% jump last Wednesday. It has still lost 30% over the past 12 months, and trades at less than half the book value of its assets.Nomura isn’t the only Japanese company facing difficult shareholder meetings this season, as the government’s corporate governance reforms give investors a bigger voice. Nissan Motor Co. faces opposition to its CEO’s reappointment after the arrest of former Chairman Carlos Ghosn, while activist shareholders are pressing for change at housing materials maker Lixil Group Corp. and rail operator Kyushu Railway Co. Read more about Lixil’s tussle with a shareholderNow that Nagai has been re-appointed, his immediate priority will be to implement his plans to cut costs at its struggling global wholesale operation and shut retail branches at home following the company’s first fiscal-year loss in a decade. In an April interview, he signaled that he may step down before the completion of the three-year overhaul as long as it goes smoothly.The jury is still out on whether his eventual successor can address Nomura’s difficulties in an industry that’s grappling with big changes, said Travis Lundy, a special situations analyst who publishes on Smartkarma.“It could be good for Nomura to be influenced by an outsider,’’ Lundy said. “The question would really be whether an outsider could do it better. It is a tough business.’’Below are key personalities on Nomura’s board following the governance changes.Koji NagaiNagai, 60, is Nomura’s longest-serving CEO in more than three decades, having begun his stint in August 2012 after predecessor Kenichi Watanabe resigned in the wake of an insider-trading scandal. A former chief of the domestic brokerage unit, Nagai has tried several times to turn around the company’s struggling overseas business, with little success. The bank has only posted profits abroad in one year under his leadership. He unveiled his third major cost-cutting program in April.Nobuyuki KogaKoga, 68, has been chairman since June 2011. He was CEO for five years until 2008, during which his efforts to expand in the U.S. were stymied by the onset of the subprime mortgage crisis that prompted him to shutter a home-loan business there. He handed the reins to Watanabe, who presided over the firm’s fateful acquisition of Lehman Brothers Holdings Inc. businesses in Europe and Asia later that year.Hiroshi KimuraKimura, 66, has been an outside director since June 2015. He spent his career at Japan Tobacco, the government-owned cigarette giant, where he was CEO from 2006 to 2012 and then chairman until 2014. Japan Tobacco made a series of overseas acquisitions under his leadership as tax increases and an aging population damped demand at home. He survived calls for his ouster in 2011 by Children’s Investment Fund Management UK LLP, a London-based hedge fund.(Updates with shareholder's comment in the eighth paragraph)To contact the reporters on this story: Takashi Nakamichi in Tokyo at tnakamichi1@bloomberg.net;Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.netTo contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell WardFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- Nomura Holdings Inc.’s under-fire chief executive won a shareholder vote on Monday, surviving a call for his ouster from the board following an information leak.

CEO Koji Nagai was reappointed at an annual shareholder meeting alongside nine other nominees proposed by the company, Japan’s biggest brokerage said in an emailed statement. The vote was held almost a week after Nomura announced several moves to placate investors following the leak and recent losses, including governance changes and a $1.4 billion stock buyback.

But those reforms -- particularly tweaks to how it selects its top executives -- are also likely to weaken the influence of management over who eventually succeeds Nagai, the bank’s longest-serving CEO in three decades.

By stripping Chairman Nobuyuki Koga of his role as head of the key nomination committee in favor of an external director, Nomura may break from the traditional way that Japanese financial firms choose their leaders when the time comes for Nagai to step down. That could be just what the loss-making brokerage needs to meet its long-term challenges, according to Morningstar Inc. analyst Michael Makdad.

“Rather than Nagai or Koga having a large say in who will be the next CEO, Nomura will try to have a selection process that is as independent as possible,’’ Makdad said. “It is possible the company would choose a candidate open to a broader range of strategic moves than if it chose a protege of Nagai who might defer to some degree to the opinions of former CEOs.’’

Like most of its Japanese peers, Nomura has tended to choose its CEO from a close circle of senior executives who are groomed by management after rising through the ranks. Now more of that responsibility will fall to outside director Hiroshi Kimura, a former Japan Tobacco Inc. chief.

Revelations last month that employees leaked market-sensitive information led to regulatory penalties and prompted proxy advisory firm Institutional Shareholder Services to recommend voting against his reappointment.

Emiko Iwabuchi, a 70-year-old Tokyo resident who holds Nomura shares, said the incident was discussed at the meeting and the bank should do more to prevent a recurrence. “You shouldn’t make your investors worry,'' she said. ``I want them to do better at educating their employees.”

Read more on ISS’s stance against Nagai

Shares of Nomura closed 0.3% higher in Tokyo. The stock was trading near a six-year low before the buyback announcement triggered an 11% jump last Wednesday. It has still lost 30% over the past 12 months, and trades at less than half the book value of its assets.

Nomura isn’t the only Japanese company facing difficult shareholder meetings this season, as the government’s corporate governance reforms give investors a bigger voice. Nissan Motor Co. faces opposition to its CEO’s reappointment after the arrest of former Chairman Carlos Ghosn, while activist shareholders are pressing for change at housing materials maker Lixil Group Corp. and rail operator Kyushu Railway Co.

Read more about Lixil’s tussle with a shareholder

Now that Nagai has been re-appointed, his immediate priority will be to implement his plans to cut costs at its struggling global wholesale operation and shut retail branches at home following the company’s first fiscal-year loss in a decade. In an April interview, he signaled that he may step down before the completion of the three-year overhaul as long as it goes smoothly.

The jury is still out on whether his eventual successor can address Nomura’s difficulties in an industry that’s grappling with big changes, said Travis Lundy, a special situations analyst who publishes on Smartkarma.

“It could be good for Nomura to be influenced by an outsider,’’ Lundy said. “The question would really be whether an outsider could do it better. It is a tough business.’’

Below are key personalities on Nomura’s board following the governance changes.

Koji Nagai

Nagai, 60, is Nomura’s longest-serving CEO in more than three decades, having begun his stint in August 2012 after predecessor Kenichi Watanabe resigned in the wake of an insider-trading scandal. A former chief of the domestic brokerage unit, Nagai has tried several times to turn around the company’s struggling overseas business, with little success. The bank has only posted profits abroad in one year under his leadership. He unveiled his third major cost-cutting program in April.

Nobuyuki Koga

Koga, 68, has been chairman since June 2011. He was CEO for five years until 2008, during which his efforts to expand in the U.S. were stymied by the onset of the subprime mortgage crisis that prompted him to shutter a home-loan business there. He handed the reins to Watanabe, who presided over the firm’s fateful acquisition of Lehman Brothers Holdings Inc. businesses in Europe and Asia later that year.

Hiroshi Kimura

Kimura, 66, has been an outside director since June 2015. He spent his career at Japan Tobacco, the government-owned cigarette giant, where he was CEO from 2006 to 2012 and then chairman until 2014. Japan Tobacco made a series of overseas acquisitions under his leadership as tax increases and an aging population damped demand at home. He survived calls for his ouster in 2011 by Children’s Investment Fund Management UK LLP, a London-based hedge fund.

(Updates with shareholder's comment in the eighth paragraph)

To contact the reporters on this story: Takashi Nakamichi in Tokyo at tnakamichi1@bloomberg.net;Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.