The founder retakes control: ousting president Akita (2016)

A founder’s share control puts a listed company’s governance on trial

The heart of this affair lay in the structure of share control: a single founder holding 43.581% of the votes in a listed company. Cookpad was set up as a company with nominating and other committees — a vessel for supervising management through deliberation centred on outside directors. And indeed a special committee of five outside directors recommended that the incumbent management stay on, and an audit committee member described the founder’s exercise of his voting rights as seizing “an unexpected opportunity,” going so far as to raise the risk of a breach of fiduciary duty. Yet none of these judgements from the governance machinery had the power to overturn a majority vote at the shareholders’ meeting. The brakes the system had prepared could not fully work in the face of an overwhelming shareholding ratio.

What remained was the question of how few options a minority shareholder has. That Hideto Fujino sold his entire holding the moment the dispute came to light was nothing other than a judgement that minority shareholders could not stand against the founder’s control. Management control returned to the founder and the return to the core business advanced — but in the process the share price sank by half in a year, and the costs left behind included the formation of a labour union and a run of departures among senior staff. How to protect the independence of the board and the special committee, and the interests of minority shareholders, under a dominant founding shareholder — Cookpad’s control affair is remembered as a case that thrust the fundamental problem of listed-company governance forward in vivid form.