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June 22, 2006 12:31 pm

Shareholders grill Sony’s chief

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Sir Howard Stringer, Sony’s chief executive, was grilled by shareholders for the first time on Thursday over the company’s performance as he reiterated a pledge to achieve a 5 per cent operating profit margin in the next fiscal year.

Many of the more than 7,247 Sony shareholders at the company’s annual general meeting in Tokyo criticised Sony’s stagnant share price, falling product quality and the poor service of its insurance arm.

But Sir Howard countered that the company’s shares were up 30 per cent since the new management took over and he pledged to “turn around this company to make it more profitable”.

Sony surprised the world one year ago by naming Sir Howard chairman and chief executive, after several years of disappointing results under the previous management.

Since then he has sought to revive the company’s core electronics division, particularly its television unit, and to break down the group’s “silos”, under which the various business units operated in isolation, often duplicating each other’s work.

At the meeting on Thursday, one disgruntled shareholder said Sony’s commitment to achieving a 4 per cent operating profit margin in its electronics business was not ambitious enough.

“In my view, this is a very low target,” the shareholder said, pointing out that about half of the improvement could probably be met through redundancies.

Another shareholder, who had bought Sony’s shares at Y14,000 “because it was the great Sony”, asked what management intended to do about the fall in the share price, which has been hovering at about Y4,000.

“We have set up in an unusually strong way and disciplined way, targets and milestones,” Sir Howard told shareholders. He said the programme was aimed at achieving the company’s target of 5 per cent consolidated operating profit margins before restructuring and one-time charges in the year ending March 2008.

Ryoji Chubachi, president, said “there are many issues that we still face. We are still not satisfied with our profitability.”

However, shareholders who had hoped that Sir Howard would transform Sony’s culture into a more aggressive Anglo-Saxon one, might have been disappointed on Thursday.

Sir Howard, who opened the meeting by greeting Sony’s shareholders in Japanese, said that he would “respect [Japan’s] cultural traditions”.

For example, on one sore issue with some shareholders – Sony’s refusal to disclose individual director’s compensation – Sir Howard defended the company’s long-held stance of only disclosing the aggregate sum of its directors’ compensation.

Amid the group’s recent business downturn, there have been growing calls to more closely link compensation to performance.

“I have managed American companies and I think I understand American compensation … and American corporate governance … but in Japan I believe [Sony’s disclosure of the aggregate sum] is adequate and rational,” he said.

“Also, American business is not always a perfect model for the rest of the world,” he added.

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