Oasis Shareholder Proposals as Presented to the Company
In another example of poor corporate governance, Hazama limits shareholders to just 400 characters to explain the reasons for each proposal, which is not enough. Nevertheless, we set out below the proposals as submitted to Hazama Ando. We ask all shareholders that truly care about improving Hazama’s future and corporate governance to vote FOR these proposals at the upcoming AGM.
1. Agenda Item 1: Implementation of Share Buyback
(1) Summary of the Agenda Item
The Company shall acquire 20,034,300 shares of the Company’s common shares (“Common Shares”), by payment of an acquisition cost up to a total of ¥17,149,361,000 Japanese Yen (however, if the permitted total acquisition cost under the Companies Act (Clause 461 of the Companies Act, “Distributable Amount”) is less than the aforementioned acquisition cost for, then up to the Distributable Amount) within 1 year from the end of the annual shareholders’ meeting in accordance with Article 156, Paragraph 1 of the Companies Act.
(2) Reasons for the Proposal
Based on the third quarter financial statements, the Company has distributable reserves of over ¥89.5 billion, representing approximately 68% of its equity value as of December 2019. Large unutilized cash balances, earning returns below the Company’s cost of capital, destroy corporate value and reduce ROE. In its Medium-Term Business Plan announced in February 2020, the Company plans to invest ¥100 billion outside the construction industry, including in highly competitive real estate projects, over the next ten years. The management failed to explain the rationale behind diving into businesses in which the Company has no experience at all or provide any actual concrete plans for the investment in the Medium-Term Business Plan, which appears to be nothing more than a pretext to hoard the cash. Accordingly, we recommend that an initial modest portion of that cash be used to fund a buyback, within ISS’ recommended size limitation[1] of 10%. A buyback reduces cost of capital and will improve long-term corporate value by investing in the Company, and as such, is a high return investment that is amongst the cheapest asset the Company can buy.
2. Agenda Item 2: Revisions to a Portion of the Articles of Incorporation (Thorough Health and Safety Management)
(1) Summary of the Agenda Item
The following provision shall be added as a new Article in the existing Articles of Incorporation, and current Articles 3 et seq. shall be renumbered correspondingly.
(Thorough Health and Safety Management)
Article 3. Health and safety management shall be conducted thoroughly by each and every officer or director of the Company, so as to prevent the occurrence under any circumstances of an accident regarding health and safety, or of natural disasters or accidents, etc., with “Safety has Priority over All Things” as the basic policy of the Company for health and safety.
The clauses related to this agenda item shall be modified to reflect the formalistic changes required to account for the other agenda items in the shareholders’ meeting (including agenda items related to Company proposals) that are approved.
(2) Reasons for the Proposal
The Company has experienced repeated, major accidents regarding health and safety at its construction locations where the Company is acting as builder in recent years. As a result of these accidents, not only persons who were working on construction, but also an unrelated bystander walking past the construction site, have lost their lives. In 2019, the Ministry of Land Infrastructure and Transport ordered the Company to suspend business operations for seven days under the construction business act, as a result of the Fukuoka Summary Court’s summary order of negligent manslaughter in the course of work by the Company’s employees in relation to the 2017 death of a passer-by.
Following the incidents of recent years, the Company publicly announced measures to prevent the recurrence of disasters like these on November 8, 2018. We believe that the fact that the Company’s previous measures on the safety have not led to a fundamental change in the Company’s posture means that we can and should make our officers’ and directors’ health and safety management even more thorough and improve awareness of safety and implementation of preventative measures, as stated in the public announcement, by incorporating this provision into the articles of incorporation of the Company.
[1] See Institutional Shareholder Services (“ISS”), Section 5 Share Repurchase Plans, Japan Proxy Voting Guidelines - Benchmark Policy Recommendations (2020 ed.),
https://www.issgovernance.com/file/policy/active/asiapacific/Japan-Voting-Guidelines.pdf.