Japanese game company GungHo Online Entertainment, best known for their hit mobile title Puzzle & Dragons, has rejected a proposal from shareholders that highlighted numerous issues with the company (as reported by ITMedia). These issues included the rising pay of its CEO, which is nearly on par with Nintendo’s, despite GungHo’s smaller scale and declining profits.
At the end of January 2025, Strategic Capital, which owns about 5.4% of GungHo, submitted a somewhat salty and lengthly proposal to the company, calling on it to “up its game.” The report highlighted how GungHo continues to rely heavily on their 2012 release Puzzle & Dragons and has yet to produce another hit, despite investing over 100 billion yen (over 640 million dollars) in the development of new titles. It also pointed out how CEO Kazuki Morishita’s pay has increased from 120 million yen to 340 million yen (over $2.2 million dollars) over the last decade, despite the company’s operating profits declining by 69% (for reference, the report notes that global giant Nintendo’s CEO makes 360 million yen).
Strategic Capital proposed 7 key points for change, including an overhaul of GungHo’s renumeration system and far more transparency – calling for changes in executives’ pay to be disclosed and explained.
In their response, GungHo announced that their Board of Directors (including outside directors) unanimously voted to reject all of Strategic Capital’s proposals on February 14.
GungHo outlines reasons for rejecting each of the proposals. Regarding CEO Morishita’s pay, they argue that the shareholders’ argument “fails to recognize the role that President Morishita has played in achieving the company’s growth, while leading the company’s business as its de facto founder for over 20 years.” Expanding on this point, GungHo’s statement highlights how Morishita brought Ragnarok Online, and has continuously directed Puzzle & Dragons, maintaining the IP’s popularity for 13 years.
Regarding the criticism that GungHo has yet to make another game that matches Puzzle and Dragons’ popularity, the company argues that the shareholders don’t understand how highly competitive the mobile game market is and how hard it is to create enduring hits in such an overcrowded market.
As for the shareholders’ proposals regarding the renumeration system, GungHo responded that their current process for determining base renumeration is already appropriate and transparent enough, and that the level of disclosure requested in the shareholders’ proposal would exceed legal requirements.
Although they rejected Strategic Capital’s proposals, GungHo has made some changes. It altered its Shareholder Return Policy on February 14, aiming to combine stable dividends with flexible share buybacks “in order to implement a more proactive profit return to our shareholders.” It also revised renumeration policy on the same day, announcing that it will appoint independent outside directors to the committee that determines renumeration.
On the same day, GungHo released its financial results for the 2024 fiscal year (January to December 2024), which were down across the board:
Sales: 103,6 million yen (down 17.3% year-on-year)
Operating profit: 17,491 million yen (down 37.3% year-on-year)
Ordinary profit: 20,013 million yen (down 31.7% year-on-year)
Net profit: 11,171 million yen (down 32.7% year-on-year)
