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Dalton Submits Minority Shareholder Proposal to Shinsei Bank
[April 25, 2018]

Dalton Submits Minority Shareholder Proposal to Shinsei Bank


Dalton Investments LLC (together with its affiliated entities, "Dalton"), announced today that it has submitted a proposal to Shinsei Bank, Limited (the "Bank") encouraging shareholders to support a revised compensation scheme under which the Bank would grant the Directors of the Board an allocation of restricted stock, instead of cash, for their service. The goal of the compensation proposal is to ensure that Directors have significant ownership in the business and increase alignment of interest between owners and managers. Dalton expects the implementation of these measures to result in long-term performance and shareholder value improvements that would exceed the cost of compensation.

"Constructive corporate engagement continues to be an important way for Dalton to add alpha for our clients invested in Japan and the rest of the world," portfolio manager James Rosenwald III said of the proposal. "We believe that a strong alignment of interest between Board Members, Senior Management and Shareholders will improve long-term outcomes. Dalton's goal is to increase the Bank's shareholder value which will benefit all shareholders but, most importantly, will allow the government's stake in Shinsei to appreciate. This will, in time, allow the government and Japanese taxpayers to profit from the Bank's improved performance. Therefore, we encourage Shinsei Bank shareholders to support the distribution of restricted shares, instead of cash compensation, in order to improve the alignment of interests among all parties."

Restricted stock compensation systems are considered best practice and recommended by Japan's Ministry of Economy, Trade and Industry (METI). The structure offers Directors ownership in the business from day one through voting rights and dividends.

Dalton's proposal outlines three requirements or restricted stock allocations:



  • (1) - The Eligible Directors shall make a contribution in kind using the monetary compensation receivables as contributed assets for the allocation of restricted stock;
  • (2) - The total amount of monetary compensation receivables to be provided to Eligible Directors shall be no greater than ¥200,000,000 per year; and,
  • (3) - Other details regarding the monetary compensation including the actual timing of the grant, number of shares to be issued as the restricted stock, and allocation of the restricted stock among the Eligible Directors, shall be determined by the Board.

The formal proposal is the culmination of an ongoing dialogue between the Bank and Dalton. The Bank's annual general meeting of shareholders is set for June 2018.

Following receipt of Dalton's proposal, the Bank introduced its own proposal on April 23, 2018 to create a restricted stock compensation plan. That proposal is located here on the Bank website. However, the Bank's proposal is for a far more modest award of restricted stock to bank directors - specifically, 10% of Dalton's proposed amount; therefore, Dalton is continuing to pursue its own proposal.


The proposal is made by Dalton Kizuna (Master) Fund LP, a fund managed by Dalton. Kizuna is a shareholder of the Bank, along with several other Dalton clients

For the official Japanese language version of the proposal, please see here. For the official English language version, please see here.

About Dalton Investments

Dalton Investments LLC is a value-focused investment management firm with expertise in Asia equities, global equities and fixed income. Headquartered in Los Angeles, with a subsidiary office in Tokyo, Dalton manages $3.8 billion (as of December 31, 2017) in actively managed long-only and long/short strategies for pensions, endowments, foundations, financial institutions and family offices.


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