Japanese game company GungHo Online Entertainment, known for developing Puzzle and Dragons and more recently, publishing Nihon Falcom’s Trails in the Sky 1st Chapter, has rejected a proposal from activist investors to dismiss its longtime CEO Kazuki Morishita (source: ITmedia).
The proposal was put forward by Strategic Capital, a Tokyo-based investment fund which controls over 11% of GungHo’s voting rights. During an extraordinary shareholders’ meeting held at its request on September 24, the activist pushed for: 1) the requirements for ousting an executive to be relaxed 2) for Morishita to be fired from his position as CEO. While the first proposal was accepted, the attempt to remove Morishita failed, not gaining enough votes from majority shareholders.
Strategic Capital has been publicly criticizing GungHo’s CEO for a while now, holding him responsible for the company’s lack of hits in the 13 years since the launch of Puzzle and Dragons. While the activists consider him underqualified and overpaid, GungHo has been defending the CEO vigorously, arguing that he has made tremendous contributions to the company’s performance and that his removal “would significantly damage corporate value,” as The Nikkei reports.
But investors remain unconvinced. Strategic Capital’s president Tsuyoshi Maruki told reporters that the results of the meeting were “disappointing,” and that his fund would continue pushing for management reforms. The common objective of so-called activist investors is generally to increase shareholder returns and thus expand their profit margin, yet GungHo’s share price has declined by 35% in the past decade, which could be why the fund is making such aggressive moves.
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