Oasis Calls for Governance Reform and Corporate Value Recovery at Nidec

(Stock Code: 6594 JT)

HONG KONG--(BUSINESS WIRE)--Oasis Management Company Ltd. (“Oasis”) is the manager to funds that beneficially own approximately 6.7% of Nidec Corporation (“Nidec” or the “Company”), a global manufacturer of motors and related products. Oasis has adopted the Japan FSA’s Principles for Responsible Institutional Investors (a/k/a the Japan Stewardship Code) and, in line with those principles, Oasis monitors and engages with its investee companies.

Oasis is a long-term shareholder and has been in dialogue with the Company even prior to the discovery of improper accounting issues. Since those issues came to light, Oasis has continued its dialogue with the Company with the aim of restoring corporate value and improving corporate governance at Nidec.

The series of improper accounting issues that have come to light at Nidec are extremely serious. As noted in the report issued by the Third-Party Committee, these issues are not merely isolated incidents, but rather, structural problems arising within a corporate culture shaped by excessive pressure to meet performance targets and the strong influence of the Company’s founder.

Oasis is particularly concerned that the root causes of these issues lie in deficiencies in Nidec’s corporate governance framework, as well as a corporate culture characterized by the dominant influence of founder Shigenobu Nagamori. Although Oasis acknowledges that the Company has made some progress toward addressing these issues, the underlying problems have not yet been fully resolved. For example, even after the improper accounting issues were revealed and Nidec was designated as a Security on Special Alert, President Kishida and the Board of Directors appointed Mr. Nagamori, who had stepped down from the Board, as Chairman Emeritus, and allowed him to remain in that position until he later voluntarily resigned from the position.

While the “excessive” focus on financial performance and share price is one of the causes of the recent issues, Oasis does not believe that it is inherently problematic for companies to manage their businesses with awareness of performance or share price as outcomes of sound corporate activities conducted in collaboration with stakeholders, and in fact we believe that management with awareness of such metrics should be encouraged. Rather, the problem at Nidec lies in a corporate culture that pressured employees into engaging in improper accounting practices for the sake of performance or share price; a lack of ethical judgment among management that effectively tolerated such improper accounting; the failure to establish appropriate checks and balances to prevent such conduct; an organizational culture that neglected the importance of auditing and internal controls; and the failure of outside directors to properly fulfill their oversight responsibilities among other factors.

Oasis believes that Nidec’s underlying business remains highly competitive and possesses significant growth potential. Given the Company’s technological leadership in the motor industry, its broad customer base, and its extensive global operations, Oasis believes that Nidec’s current share price is significantly undervalued relative to its intrinsic value.

In recent years, the Company’s share price has declined substantially as a result of corporate scandals and governance issues, causing significant losses for many shareholders. However, Oasis believes that Nidec has ample potential to restore its corporate value if meaningful governance reforms, together with business reforms, are implemented and market confidence is regained. In parallel to the obviously needed corporate governance reforms, we believe that the Company still needs to work on the key components of its “Conversion 2027” plan, including portfolio restructuring, JPY150 billion in cost savings through consolidation and optimization of business locations, expansion of high-value add business, and conversion to a true global system.

Oasis believes that fundamental improvements in corporate governance are essential for Nidec to restore the trust of the market and its stakeholders. In particular, Oasis believes that such improvements should include, but not limited to: strengthening the effectiveness of the Board’s oversight function; appointing and empowering truly independent outside directors, including individuals with management and accounting expertise; establishing a governance structure that does not rely excessively on the influence of a particular individual including the founder; enhancing transparent disclosure to investors; reforming the Company’s corporate culture; ensuring the independence of the accounting function; and strengthening the internal audit framework and whistleblower system.

Further, we also believe it is essential that the company properly evaluates and addresses the responsibilities of current and former directors and executive officers, especially, but not limited to, Mr. Nagamori. We support the Company’s intention to establish a “Responsibility Investigation Committee,” and urge the Company to ensure that it has the maximum possible effectiveness and independence, and that the pursuit of accountability is conducted promptly and thoroughly. We believe that without a sincere reflection on the failures that occurred, and a proper attribution of responsibility, the Company cannot achieve a true and lasting turnaround.

As a long-term and large shareholder, Oasis strongly encourages Nidec to address these issues and accelerate the restoration of its corporate value and its revitalization as a company. Oasis will continue constructive dialogue with the Company and will provide support and further engagement where appropriate in order to improve corporate governance and enhance corporate value (and thereby the common interests of shareholders) for the benefit of all stakeholders.

Oasis Management Company Ltd. manages private investment funds focused on opportunities in a wide array of asset classes across countries and sectors. Oasis was founded in 2002 by Seth H. Fischer, who leads the firm as its Chief Investment Officer. More information about Oasis is available at https://oasiscm.com. Oasis has adopted the Japan FSA’s “Principles for Responsible Institutional Investors” (a.k.a. the Japan Stewardship Code) and, in line with those principles, Oasis monitors and engages with our investee companies.

The information and opinions contained in this press release (referred to as the "Document") are provided by Oasis Management Company (“Oasis”) for informational or reference purposes only. The Document is not intended to solicit or seek shareholders to, jointly with Oasis, acquire or transfer, or exercise any voting rights or other shareholder’s rights with respect to any shares or other securities of a specific company which are subject to the disclosure requirements under the large shareholding disclosure rules under the Financial Instrument and Exchange Act. Shareholders that have an agreement to jointly exercise their voting rights are regarded as Joint Holders under the Japanese large shareholding disclosure rules and they must file notification of their aggregate shareholding with the relevant Japanese authority for public disclosure under the Financial Instruments and Exchange Act. Except in the event that Oasis expressly enters into the agreement as a joint holder requiring such disclosure, Oasis does not intend to take any action triggering reporting obligations as a Joint Holder. The Document exclusively represents the opinions, interpretations, and estimates of Oasis.