Japan is moving to tighten the criteria for shareholder proposals, reflecting a growing backlash from companies frustrated by intensifying pressure from activist investors. Lawmakers and business lobbies argue that current rules allow what they describe as abusive proposals, diverting resources from long-term growth.
An influential group of lawmakers plans to recommend raising shareholder proposal thresholds and restricting proposals on business execution. Current law allows a shareholder to submit a proposal if they have held for six months at least 1% of voting rights or 300 voting units. Critics note that reduced minimum share lot sizes and stock splits have made the unit-based threshold easier to meet.
A justice ministry advisory panel proposed revising the Companies Act, presenting options to limit eligibility to holders of at least 1% of voting rights or to raise the current 300-unit threshold. The ministry is seeking public comment before submitting a bill next year.
Some investors view these potential changes negatively, stating that measures reducing shareholders' ability to engage could hinder corporate reform. However, the removal of the 300-unit rule alone is expected to have little impact on most activists who own more than 1% of their targets. While some business lobbies advocate for higher hurdles, such as increasing the 1% threshold to 5%, these are not currently under consideration.
Activist investors have successfully pushed for higher dividends, share buybacks, and structural changes in Japan, supporting the stock market's performance. For instance, activist fund Palliser Capital has reportedly invested in factory automation firm SMC Corp, proposing a significant share buyback.