Governance fit for purpose
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Kao Corporation is a Japanese consumer goods manufacturer producing beauty, healthcare and household products, and chemicals.
In 2025, an activist shareholder submitted eight proposals for voting at the AGM, advocating for the appointment of additional independent directors and changes to executive and non-executive remuneration. We are a supportive, long-term shareholder of Kao, but we also recognise that it has faced challenges with its supply chain management, overseas expansion and cosmetics business. We were therefore open to considering the potential value of introducing fresh perspectives and challenge to the board. The board recommended opposing all items, while the activist argued that its director nominees would bring international fast-moving consumer goods experience to the board and strengthen governance, leadership and alignment.
After meeting with both the management team at Kao and hearing a presentation from the activist, we concluded that there was value in introducing specific additional external perspectives and increasing constructive challenge on the board. Accordingly, in addition to supporting all company-nominated directors at the AGM, we supported two shareholder-nominated candidates. We believed their expertise in financial planning, pricing optimisation and supply chain transformation would be particularly relevant to the company. To ensure the appropriate level of incentivisation was in place for a larger board, we also supported the shareholder proposal to increase the aggregate fees for non-executive directors.
Continuously held since: 1997 Holding as at end 2025: 0.41 percent
To ensure the appropriate level of incentivisation was in place for a larger board, we also supported the shareholder proposal to increase the aggregate fees for non-executive directors.
None of the shareholder proposals passed, although some that we supported attracted more than 20 percent support. Following the AGM, we wrote to the company explaining our approach and our view that its current midterm plan could be more ambitious. The company acknowledged our position and said this would be passed to the board. We subsequently met with an independent outside director at Kao, as part of the company's post-AGM outreach. Gaining access to independent directors in Japan is, generally, a relatively new phenomenon and one we view positively, as it affirms confidence in the calibre of a company's board members. We learned that the board had received our letter and appreciated the rationale for our approach. It also provided a valuable opportunity to discuss our voting approach and board dynamics further, and to encourage greater ambition in strategic and financial targets.
The AGM and subsequent meetings have helped to deepen our relationship with the board and confirmed shared recognition of the need for greater ambition, setting the stage for further engagement in the next planning cycle.