Ichiro Suzuki
Fuji Media Holdings has been caught in an uproar since the beginning of 2025. A number of large advertisers have pulled their ads from Fuji Television Networks, a wholly owned subsidiary of Fuji Media, in protest of the network’s mishandling of a scandal that involved their female employee. It’s been reported that a celebrity TV personality Masahiro Nakai and Fuji’s young employee had a trouble between them. Details of the trouble have been only speculated but the two have come to settle the issue outside the court by the end of 2024. This supposedly secret issue was then brought to light by a weekly magazine. While the ‘scandal’ is not something to be discussed here, the incident has exposed lack of transparency at the company, leading to a question of corporate governance for a publicly traded company in general in Japan. For Fuji Media, governance has been shockingly weak if it was in place at all, or maybe a lack of it that was a real problem.
Fiji Media had their shares listed in the Tokyo Stock Exchange in 1997, and after over a quarter century it is trading at a half the share price of those early days. It rose sharply in the first two years, amid an immense bubble that globally drove up shares of telecom, media and technology (TMT) companies. Halving peaked out at the turn of the century, Fuji’s share price crashed back down and have essentially moved sideways for over two decades. Half the price of IPO days after almost 30 years itself shows that the company has been in a deep problem. Even worse, no one has ever been held responsible for the deplorable share price performance. It is true that Japan’s stock market was mired in a long, long slump or in an adjustment period from the bubble era. Nonetheless, the broader market has more than doubled since Fuji hit the market as a public company. As a proof of its weak share price performances, some metrics are simply awful: price-to-book ratio at 0.6 times after a 50% run-up since the beginning of the year, return on equity at 4.4% and shareholders’ equity to asset ratio at 60% (too much capital).
There is a reason behind Fuji’s low asset efficiency. The majority of its earnings comes from the other division of the company, which is real estate. Sankei Building is a well established landlord that sits on a number of buildings in Tokyo and generate relatively steady income for Fuji Media. Its buildings are carried on the balance sheet at cost. Marking them to market would boost their asset value considerably, bringing down asset efficiency numbers even further. Management can run the company sitting on such real estate holdings that shield them from volatility associated with the broadcasting business. Such “comfort” allows them to care no so much about shareholders. They might have never bothered to think about what it means to be a publicly traded company.
Of course, none of the executive directors on Fuji’s board has never worked anywhere else, having climbed the ladder as a journalist or a producer/ director on the creative side. This is a traditional Japanese company. Such lopsided experiences are one of the reasons behind Fuji’s weak financial performances. Everyone is looking at the company from the same vantage point. Those with numbers skills aren’t probably represented well on the board. These metrics would have provoked foreign predators to make an attempt to take over the grossly undervalued company. Fuji’s management, however, can be relaxed since a law caps a media company’s foreign ownership at 20%.
Of the board members, the one who wields real power is neither CEO nor president, but an 87-year old man named Hisashi Hieda who has a title of ‘senior advisor’. Since he rose to the helm of the company in 1987, he is reigning over Fuji Media for nearly 40 years, but without executive responsibilities in recent years after having stepped down as chairman. Mr. Hieda behaves as if he owns the company though his ownership is only one-tenth of a percentage point of the company. It is believed that CEO has to have a nod from Mr. Hieda on major decisions.
There are seven non-executive outsiders on the board of directors. Their responsibility in theory is to provide the management team with different perspectives from that of management and check the people at the helm. Their presence, of course, is cosmetic. They are sitting on the board to rubber-stamp what the management team proposes. One of them was interviewed about Mr. Hieda and responded “I find Mr. Hieda’s long experience so invaluable”. They are all puppets with no guts to speak against the men with power in the company. Sheepish non-executive directors are not uncommon on Corporate Japan’s board, but those at Fuji appear too extreme.
Japan’s institutional investors haven’t shown dissatisfaction on management of Fuji, either on financial results or governance of the company. Every year, they have rubber-stamped on proposals by the management team and kept electing the people they recommended to the board, including Mr. Hieda. It is the fault of insurance companies and asset management companies that didn’t give a hard look at what was proposed by management, but this applies to all proxy votings ahead of annual general shareholders meetings.
Amid Japanese institutional shareholders’ sheepishness, it is, not surprisingly, foreign activist investors that raised voice, even in the absence of their chance to take over the company. Dalton Investments, value oriented investment management firm based in Los Angles, CA, are pushing the Fuji Media’s board to improve their governance, especially on enhanced transparency of their actions, and is requesting senior advisor Hieda to step down since he is not only wielding excessive power despite undefined responsibility but also has been staying on the board for far too long. Yet again, only under external pressure, Japan can make changes that come with pain. This hasn’t changed since the arrival of Commodore Perry of the U.S. Navy in 1853 that plied open the closed country for foreign trade.
While not demanded by shareholders, at least not yet, a potential issue in the long run could be realization of the Fuji Media’s hidden value. Breaking up of the company into two could come up as an issue, rather than letting it stay in the current form that obviously gives conglomerate discount to the company. It doesn’t seem likely at present that Japanese institutional investors go this far to make such a ‘selfish’ demand as shareholders, but foreign activists would almost certainly want a break-up if there were no foreign ownership limit. Then, revalued assets would force the company for much enhanced efficiency of assets. Fuji’s management should consider taking the company private if they don’t want to be ‘harassed’ by self-centered shareholders. As the world has entered the second quarter of the 21st century, the broadcasting industry would find it increasingly difficult to run their companies the way they have been doing since the 20th century.
About the author: Mr. Suzuki is a retired investment banker based in Tokyo, Japan.
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