KANSAI ELECTRIC POWER CO.
Tokyo Stock Exchange: 9503                                         Meeting Date: 6/26/2014

Shareholders of Kansai Electric Power Co., Inc. (“KEPCO”) will vote on 25 shareholder proposals on Thursday – but it could have been worse. Following the release of the original notice of meeting, KEPCO continued to receive additional shareholder proposals, with, at one point, the company announcing that shareholders would be voting 82 such proposals. Thankfully, this was whittled down to a mere 25, as the remaining were excluded as they were determined to be in violation of the Company Act and Company’s Articles of Incorporation. The excluded proposals could best be described as abusive in nature, as they served to distract management and shareholder attention from more pressing issues. For example, one proposal called for the company to change its name to “Dead Earth Company, Incorporated”; another wanted to establish a “Shareholder Ignorance Committee” that would consider how to ignore the wishes of shareholders.

While increasing participation by shareholders can be viewed as a positive trend, the aforementioned shareholder resolutions and others of similar ilk (Japan East Railway, for example, also received and excluded similar proposals) undermine shareholder rights and waste time and resources. Although in Japan shareholders are required to submit proposals no later than eight weeks prior to an annual meeting, the receipt of these new proposals caused KEPCO to twice delay the release of its notice of meeting to June 6, 2014 (only 20 days prior to the meeting date). Disturbingly for shareholders who take their rights and voting responsibilities seriously, the affect was greatly reducing the time allowed for shareholders to evaluate the proposed items and formulate educated, well-informed voting decisions.

Generally, we believe that companies are in the best position to make the decisions regarding day-to-day operations and that they should not be micromanaged by the shareholders. However, we believe that well-crafted shareholder proposals that enhance important disclosures, that protect and enhance important shareholder rights or those that are clearly linked to the creation of shareholder value can serve as a powerful tool. However, the emergence of these abusive, time-wasting shareholder proposals should be a matter of concern not only for KEPCO’s shareholders but also for the development of corporate governance in Japan.