JAPAN - Japan's Pension Fund Association (PFA) is preparing to sue Seibu Railway in a bid to seek compensation for losses incurred during 2004, when the rail group was thrown out of the Tokyo Stock Exchange for falsifying financial statements.
The lawsuit marks the first time a Japanese institutional investor has flexed its muscles and pursued legal action against a company.
The PFA manages 1,400 corporate pension funds is believed to be seeking damages of up to US$38m.
The PFA is not alone. The Government Pension Investment Fund (GBIF), the world's largest public pension fund with assets worth more than Switzerland's gross domestic product, is also considering a lawsuit against Seibu for some $76m in losses.
The lawsuits are signs that Japanese institutional investors are beginning to act on behalf of shareholders by using voting rights and legal action to improve corporate governance measures. Shareholder activism in Japan has long been a lame duck with many ordinary investors losing out through their pension fund assets. Both the PFA and the GBIF have been two of Japan's most vocal advocates for shareholder interests in recent years.
Following reports that Seibu would be de-listed late last year, the PFA sold its 1.9m Seibu shares for some $4.7m, resulting in capital losses of more than $13.2m. The PFA had purchased the Seibu shares as part of index investing.
The losses on the shares vary depending on the time at which they were purchased, which has resulted in the PFA submitting several loss calculations to the court ranging from $13-38m.
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