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Apr 10, 2016

Will Suzuki resignation from 7-Eleven parent set new trend?

New governance code requiring independent directors could lay foundation for rising dissent on Japanese boards

There are few cultures where losing face is as personally devastating as in Japan. The abrupt resignation on April 7 of Toshifumi Suzuki, CEO of 7-Eleven’s Japan-based parent company, Seven & I Holdings, may augur a series of such departures if more board members of Japanese companies start asserting themselves and voting independently.

As reported in Corporate Secretary in its Winter 2016 print edition, ‘controlled companies are a fact of life in Japan, either through family holdings or so-called cross-shareholdings that create less obvious but often tight business groupings.’ In June 2015, Japan’s new corporate governance code took effect. This will require Japanese firms to name at least two independent outside directors – which will be a first for many companies.

Suzuki’s resignation was purportedly sparked by a boardroom conflict with US activist hedge fund Third Point, which purchased an unknown number of shares in Seven & I in 2015. Third Point’s founder and CEO, Dan Loeb, had opposed Susuki’s potential move to appoint his own son as his successor, as has been reported by the Wall Street Journal and Financial Times. The board apparently revolted when Suzuki, 83, tried to remove Ryuichi Isaka, who heads 7-Eleven’s Japanese arm and was considered a viable successor to Suzuki, whose health is worsening. The company has not yet announced a successor.

At a news conference last week where he announced he was stepping down, Suzuki accepted responsibility for the abortive effort to fire Isaka, who he previously said lacked the appropriate leadership skills, but he denied plans to appoint his son as a successor. Loeb, who said he didn’t want to see a dynasty created at Seven & I, has publicly supported Isaka as a successor to Suzuki, as reported by the New York Times.

With or without the involvement of activist investors, Japanese boards are likely to see an increase in dissent as independent outside directors are appointed and bring fresh eyes and no personal allegiances into the boardroom. And with succession plans among the matters sure to come under closer scrutiny, that could prompt more CEOs who aren’t accustomed to opposition to feel a sense of shame and step down.

For more on the Suzuki story, click here.