Kyocera's Governance Crisis: Can Activist Pressure Force a Turnaround?

Kyocera, the Japanese ceramics and electronics giant, faces a governance reckoning. Over a decade of underperformance, stubborn cross-shareholdings, and shareholder disapproval have led to a rare alliance between activist investors and proxy advisors. At the heart of the storm is Oasis Management, whose seven-point plan to dismantle Kyocera's bloated structure promises a potential 90% upside—if implemented. The question is whether Kyocera's leadership will heed the call or risk further value destruction.

A Decade of Underperformance

Kyocera's stock has stagnated since 2015, even as peers like Maruwa Co. (6977.T) and TDK Corporation (6762.T) surged. While Maruwa's shares rose 1,118%, Kyocera's market cap languished, a reflection of its deteriorating profitability. Return on Equity (ROE) averaged below 5% over five years, hitting a nadir of just 0.8% in 2023. Cross-shareholdings—non-strategic stakes in other companies—now account for 53% of Kyocera's net assets, far exceeding the 20% threshold set by Institutional Shareholder Services (ISS). These holdings, including a 15.29% stake in KDDI Corp. (9433.T), have become a liability, diverting capital from high-growth core businesses like semiconductors and ceramics.

Shareholder Dissent and Failing Reforms

The writing is on the wall for Kyocera's leadership. At its 2023 AGM, approval for President Hideo Tanimoto plummeted to 65%, down from 96% in 2015. ISS and Glass Lewis have amplified this discontent, recommending shareholders vote against reappointing both the chairman and president. Their criticism hinges on Kyocera's failure to address cross-holdings and its inability to prioritize core competencies. Recent half-measures—such as selling a third of its KDDI stake and a ¥400 billion buyback—have been dismissed as “reactive” by Oasis, which argues they ignore the root cause: over-diversification and poor capital allocation.

Oasis's Seven-Point Plan: A Blueprint for Value

Oasis's 2025 campaign builds on its 2015 demands, now backed by a detailed roadmap to unlock shareholder value:
1. Divest 30% of revenue from non-core businesses (¥660 billion), including loss-making ventures.
2. Exit the organic packaging segment, which has dragged down margins.
3. Restructure KAVX, its automotive subsidiary, to meet industry profitability standards.
4. Halt unproductive R&D in niche technologies like GaN and millimeter-wave, reallocating funds to core semiconductor and ceramics R&D.
5. Focus on high-growth markets in ceramics, automotive, and semiconductors, leveraging Kyocera's technical expertise.
6. Aggressive M&A to bolster core businesses, such as acquiring semiconductor foundries.
7. Execute a ¥1 trillion buyback over four years (37% of current market cap), funded by monetizing cross-holdings and debt issuance.

Oasis estimates these steps could lift Kyocera's stock by 90%, driven by higher ROE and valuation multiples. The plan's genius lies in its focus on capital efficiency: reducing cross-shareholdings would free up JPY1.7 trillion in KDDI stakes alone, while sharpening the company's strategic focus.

The Governance Crossroads

Kyocera's governance failures are systemic. Cross-shareholdings, once a feature of Japan's keiretsu system, now hinder flexibility. ISS's 20% threshold for cross-holdings is a proxy for the broader issue: capital tied up in non-core assets cannot fuel innovation or shareholder returns. The company's recent semiconductor investments—a JPY600 billion bet on AI-driven demand—highlight its potential but also its contradictions. Without divesting non-strategic assets, Kyocera risks overleveraging itself.

The proxy advisors' stance underscores a broader shift in investor priorities. In 2025, ISS and Glass Lewis increasingly penalize companies that prioritize “strategic flexibility” over shareholder returns. For Kyocera, this means a stark choice: adopt structural reforms or face continued disinvestment.

Investment Implications

• Vote against leadership: ISS and Glass Lewis recommendations are a clarion call. Investors should oppose reappointing Yamaguchi and Tanimoto, signaling demand for change.
• Support Oasis's plan: The seven-point strategy is actionable and data-backed. If adopted, Kyocera's ROE could rebound to 15-20%, bringing its valuation in line with peers.
• Monitor KDDI stake progress: Any sale or monetization of the JPY1.7 trillion KDDI holding would be a near-term catalyst. A full divestiture could add ~50% to Kyocera's market cap.

Risks

Kyocera's management may resist, citing “strategic value” in cross-holdings or operational complexity. A prolonged stalemate could depress the stock further. Additionally, global semiconductor demand slowdowns could test the company's ability to execute its tech bets.

Conclusion

Kyocera stands at a pivotal moment. Its governance failures have alienated investors, while Oasis's plan offers a clear path to revival. With proxy advisors and activists aligned, the company has little room to maneuver. Shareholders should demand bold action—and vote accordingly. The upside is compelling, but only if Kyocera's leadership finally listens.