Seven & i Holdings Co., Ltd. manage and operate group companies with a wide variety of business operations including convenience stores, superstores, food services and financial services.
We have had a longstanding engagement relationship with Seven & i dating back to 2008 when we first challenged the company on board independence, diversity, and low profitability of its superstore business. We intensified our engagement on business performance in 2016 following the resignation of the former chair of the board. In 2019, we met with the CEO to discuss the merits of a proposal to sell its underperforming supermarket business and urged the company to publish a clear and convincing plan to address underperformance, including specific targets.
We first raised the issue of lack of board gender diversity in 2018 which the company acknowledged, appointing its first female director in 2019. However, ahead of the 2020 AGM, we were disappointed to see that board independence had lowered. We reiterated our expectation for further female director appointments, aiming to be in line with the 30% Club Japan’s expectations of having 30% female representation on the board. In advance of the 2021 AGM, we expressed similar concern and provided our enhanced voting policy on gender diversity.
Following the resignation of the chair in 2016, the company indicated that reform was now more possible and set out plans to streamline its supermarket business, closing underperforming superstores and department stores, while growing its successful convenience stores, with the goal of achieving 10% return on equity over three years. In March 2022, the company developed a more comprehensive plan to change its capital allocation, with a focus on expansion overseas.
On board governance, the company responded well to our expectations on board gender diversity. As part of the board refreshment in 2022, three new female directors were appointed, of which two were non-Japanese, bringing the board gender ratio up to 20%. The appointment of additional non-Japanese independent directors with relevant business background increased its board diversity and it is now a majority independent board.
For next steps, we recently discussed the director selection process and encouraged the alignment of its skill matrix disclosure with corporate strategy. We will also continue to engage for better disclosure of the pay of its directors in its US subsidiary, including the metrics for calculating the cash bonus. We will also continue to monitor the company’s progress on its business strategy reform.