SONY Sony Group Corporation

TOKYO—An 83-year-old convenience-store pioneer who built a Tokyo-based 7-Eleven empire said Thursday he would step down after losing a boardroom clash that pitted him against U.S. hedge-fund operator Daniel Loeb.

The resignation of Toshifumi Suzuki, chief executive of 7-Eleven's parent company Seven & i Holdings, was a milestone for the budding activist-shareholder movement in Japan, which has drawn strength from Prime Minister Shinzo Abe's corporate-governance overhaul. Mr. Suzuki has effectively controlled his company for decades and is one of Japan's most prominent executives.

The battle between Mr. Suzuki and Mr. Loeb centered on succession and corporate strategy. Under Mr. Suzuki, Seven & i Holdings has aggressively acquired other retailers including department stores and a baby-goods chain, while retaining the money-losing chain of big-box stores called Ito-Yokado that originally formed the company's core.

Mr. Loeb said the company should shed those businesses and focus on convenience stores globally. And he praised the head of the convenience-store business in Japan, Ryuichi Isaka, calling Mr. Isaka a natural candidate to replace Mr. Suzuki as the parent's CEO.

The dispute came to a climax on Thursday morning, when the Seven & i Holdings board met to consider a proposal backed by Mr. Suzuki to oust Mr. Isaka from his job. The vote was as close as it could be: 7-6 in favor, with two abstentions. The motion failed because it needed a majority of the 15-member board.

Hours later, at a sometimes-emotional news conference, Mr. Suzuki said he was stepping down. He described a lengthy effort to get Mr. Isaka to quit that ultimately failed. Mr. Suzuki said that in light of the turmoil, he no longer felt worthy of continuing in the CEO role.

No new CEO was immediately named. Mr. Suzuki said the board would have to consider that as part of a broader management revamp. A company spokeswoman said Mr. Isaka wasn't available to comment.

In a call with reporters in March, Mr. Loeb said he would be concerned if Mr. Suzuki's son, who serves as chief information officer of Seven & i Holdings, received an edge in the choice of a successor. "This is not a dynasty. This is a corporation," Mr. Loeb said. He said in a March 27 letter to Seven & i Holdings' directors: "Mr. Isaka should be rewarded—not demoted—for his performance and commitment to delivering results for shareholders."

The elder Mr. Suzuki denied that he wanted his son as a successor. "I have never said it at the company and I have never said it to my son either," he told the news conference.

Shares of Seven & i Holdings fell more than 8% at one point Thursday but recovered to finish down 1.6% after news of the elder Mr. Suzuki's planned resignation emerged.

In Japan, convenience stores are ubiquitous, selling a wide variety of products such as rice balls and toiletries. They have expanded into services, allowing customers to pay utility bills and buy tickets to concerts. Mr. Suzuki helped develop the concept of flooding urban areas with small stores, typically open 24 hours, and carefully managing inventory of the 2,000 or 3,000 items people are most likely to need.

The clash between Mr. Suzuki and Mr. Loeb reflects broader changes in corporate governance roiling Japanese business.

A corporate-governance code pushed by the Abe government took effect in June 2015, calling on companies to appoint outside directors and pay more heed to shareholder concerns. One outside director at Seven & i Holdings, Kunio Ito, led a government panel that produced the 2014 "Ito Report" calling for a stronger focus on shareholder returns.

Akira Kiyota, chief executive of the company that runs the Tokyo Stock Exchange, said in an interview that the Seven & i Holdings board's vote was an example of outside directors' growing influence, an idea the exchange has helped promote in Japan. "Governance is working," he said.

Mr. Loeb has said that his fund, Third Point LLC, owns hundreds of millions of dollars in common shares of Seven & i Holdings. The investor has made a name for himself in recent years by challenging Sony Corp. to restructure unprofitable units and urging industrial-robot maker Fanuc Corp. to raise dividends—with some success in both cases.

The company now called Seven & i Holdings was long centered around the big-box Ito-Yokado stores, which founder Masatoshi Ito built on a U.S. model selling groceries, clothes and household items.

In 1991, the Japanese company acquired the U.S. operator of 7-Eleven stores. Today, the global 7-Eleven business is fully owned by the Tokyo-based company and it has more than 58,000 convenience stores in Japan, North America, China and elsewhere.

Seven & i Holdings released results Thursday for the year ending in February 2016 that showed how the convenience-store business has come to dominate its profits while the big-box stores are struggling—a point stressed by Mr. Loeb. 7-Eleven Japan reported operating income of slightly more than $2 billion, while Ito-Yokado posted an operating loss.

Founder Mr. Ito, 91, remains honorary chairman of Seven & i Holdings, although he is no longer on the board. In a twist, Mr. Suzuki's camp said it sought the founder's approval for Thursday's board motion, but Mr. Ito refused to give it for reasons that weren't clear. A spokeswoman said he wasn't available to comment.

Mr. Suzuki appeared saddened by the rebuff from his longtime patron. "He had never disagreed with whatever I proposed," Mr. Suzuki said.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com and Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

April 07, 2016 08:25 ET (12:25 GMT)

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