There are many reasons why the shares of a pension provider and the shares of an orthopaedics company might perform differently, but I cannot help suspecting that the poor share price performance dominates board discussions at the American company in a way it does not at the UK one.
Some commentators object to the large number of share options that US boards issue their executives, but it does, at least, keep them focused on the share price.
Management is also well aware that a low share price attracts takeover activity. Here, again, regional differences matter.
A US company is very likely to receive takeover approaches or activist shareholders building stakes if their shares malinger.
In the UK this is fairly likely, though Labour administrations generally object to takeovers that lead to redundancies for UK employees.
In the rest of the world, there is generally much less pressure on underperforming companies to raise their game. It is hard to think of a recent takeover bid in European equity markets.
Agreed mergers are generally the way companies like to do business and the terms seldom make up for years of underperformance investors have endured.
Again, the costs of rationalising companies, particularly redundancy costs, are very high and environmental expenses also continue to rise.
From there being almost no takeover activity, Japan is starting to see a little. It would be unwise to expect a free-for-all.
It seems likely a Canadian company that wants to buy the 7-Eleven group will be rebuffed – partly down to an argument that the acquirer might close 7-Eleven branches on Japanese islands that rely on the stores.
The low price-to-book valuation of Japanese equities suggests international investors still think takeover activity is a rarity.
Shareholder activism
Recent years have seen a sharp rise in shareholder activism, both from local investors and overseas.
This has led to considerable progress in companies raising profitability and dividends and in management teams selling cross shareholdings and buying back equity below book value.
In my view there is plenty of progress still to come, and this is likely to enhance investment returns.
In local currency terms, the Nikkei has risen 85 percent over the past five years, not far off the S&P 500 US index.
The fall in the yen over that period has hidden these results from investors unless they were in currency-hedged unit classes. I would say this performance reflects these ongoing improvements in governance and shareholder focus.
