Seven & i'south 83-year-old CEO quits after board rejects his proposal

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Source:   —  April 07, 2016, at 3:33 PM

The patriarch'south sudden departure without a named successor creates a power vacuum at the sprawling conglomerate, with its 50.000 employees and $90 billion in sales, just as it revamps struggling supermarkets and dept stores.

The veteran boss of retail grouping Seven & i Holdings Co Ltd (), who pioneered 24-hour convenience stores in Japan four decades ago, said on Thursday that he's stepping down to get responsibility for a failed management reshuffle.

The patriarch'south sudden departure without a named successor creates a power vacuum at the sprawling conglomerate, with its 50.000 employees and $90 billion in sales, just as it revamps struggling supermarkets and department stores.

The boardroom astonishment at one of the country'south biggest firms also signals a modify in atmosphere in Japanese corporate governance, where management traditionally enjoyed support by large shareholders and board members.

The 83-year-old Chief Executive and Chairman Toshifumi Suzuki said he decided to quit after a board meeting in which he failed to garner sufficient votes to replace the president of grouping convenience store chain, Seven-Eleven Japan.

"It's my lack of virtue and I'm unbearably ashamed," Suzuki told a news conference, without elaborating on the timing of his resignation.

"I was supposed to attend an analyst meeting tomorrow. But I cannot go there and clarify this year'south prospects anymore after I decided to quite."

RETAIL LEGEND

Suzuki is a legendary figure in Japan'south retail industry. He brought the 7-Eleven franchise to the country in the one thousand nine hundred seventy and later took over its U. S. parent.

In past weeks, Suzuki'south company has been the target of activist investor Daniel Loeb, who wrote an open letter voicing concerns over rumors Suzuki planned to appoint his son as successor.

Earlier on Thursday, Suzuki'south management proposed replacing the man Loeb had instead championed for the top job - Seven-Eleven Japan President Ryuichi Isaka. Suzuki contended Isaka had failed to meet expectations. It wasn't immediately clear whether Suzuki had proposed an alternative.

Seven & i didn't immediately reply to a request for comment from Isaka when contacted by Reuters.

Of fifteen board members including four exterior directors, seven voted in favor of the proposal while six voted against. But with two casting empty votes, the proposal didn't garner a large sufficient majority, Suzuki said.

"I don't care about the breakdown of the votes, I consider I've lost the confidence of the board when no-votes were cast by interior directors," Suzuki said, adding, "I'm not going to title my successor."

Shares of Seven & i lost as much as 8.6 % in morning trade, but pared losses after news of the vote and after reports of the CEO'south departure. The stock closed down 1.6 percent, versus a 0.2 % rise in the benchmark Nikkei index .

On Thursday, Seven & i also reported a 2.6 % rise in operating profit for the year ended February, at 352.3 billion yen ($3.25 billion).

SCARCE REBELLION

The failure is a rarity in Japan where corporate boards traditionally endorse management, particularly at Seven & i, where Suzuki has held sway for decades.

It's not clear who'll succeed Suzuki but the retention of Isaka will for presently be claimed as a triumph for Loeb, CEO of investment advisor Third Point and a scarce outsider challenging corporate Japan.

In the open letter, Loeb urged the retailer to maintain Isaka, saying "rumors" of Isaka'south planned removal were of "significant concern."

Loeb, who previously campaigned for modify at companies such as Sony Corp () and Fanuc Corp (), said Isaka had been "instrumental to the success of Seven-Eleven Japan."

The chain has regularly accounted for nearly seventy % of Seven & i's profit.

Loeb'south company Third Point, which owns an undisclosed quantity of Seven & i, didn't immediately reply to a request for comment.

Also in Loeb'south letter, the activist investor raised concerns about rumors that Suzuki was grooming his son, Seven & i'south Chief Information Officer Yasuhiro Suzuki, as his successor.

The elder Suzuki said he was surprised at such rumors having never "uttered any such things," and that his son didn't consider such prospect.

The board'south latest decision comes as Japanese firms work to make better corporate governance through measures such as appointing more exterior directors, after the government called on companies to do more to invite foreign capital.

Latest month, Seven & i said it'd set up a nomination and compensation committee headed by an outside director.

(Reporting by Taiga Uranaka and Ritsuko Shimizu; Editing by Christopher Cushing)

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