Shareholders of Japanese retail giant Seven & i Holdings Co. on Thursday approved the reappointment of Ryuichi Isaka as president, rejecting a demand by a U.S. activist fund for the removal of the top executive in a high-profile proxy fight.

ValueAct Capital Management LP claims the management needs to do more restructuring for a greater focus on the retailer's mainstay 7-Eleven convenience store business and sought at an annual shareholders' meeting to replace four board members, including Isaka, with candidates it selected.

But the proposal was rejected, with the majority of the shareholders participating in the meeting approving the company's plans to tap Isaka and 14 others as board members, a company spokesman said.

Shareholders of Seven & i Holdings Co. arrive at the venue of their general meeting in Tokyo on May 25, 2023. (Kyodo)

"We will aim to make big strides to join the world's top group" under his management team, Isaka told shareholders at the meeting.

Still, the approval rate for the president fell reflecting shareholder frustration, with 76.36 percent supporting his reappointment at this year's meeting, down about 18 points from last year, according to Seven & i.

"ValueAct makes a good point listing management challenges and is making an argument in the right way, but their proposal is too demanding," a shareholder in his 60s said. "But on the other hand, Mr. Isaka's management is not quick enough in making decisions."

Seven & i has seen a substantial recovery of its overall earnings from pandemic levels, becoming the first Japanese retailer to book more than 10 trillion yen ($72 billion) in the last fiscal year ended Feb. 28, with a record net profit of 280.98 billion yen.

Still, the pressure on company management grew after proxy advisory firms Institutional Shareholder Services and Glass Lewis recommended that shareholders support ValueAct's proposal. ISS said the company's performance is not on par with investor expectations.

The U.S. fund, which has a 4.4 percent stake in Seven & i, has demanded the retailer spin off the convenience store business and sell its loss-making Ito-Yokado supermarket unit in a bid to increase its corporate value.

Seven & i has said the proposal was only about raising shareholder value in the short-term, arguing its know-how in supermarket operations is essential for food product development in its convenience store unit.

In the face of increasing pressure from shareholders, Seven & i began restructuring its businesses in recent years.

Last November, the retailer said it will sell its struggling department store unit, Sogo & Seibu Co., to U.S.-based investment fund Fortress Investment Group LLC.

The Japanese company also outlined a plan in March to cut the number of stores at its Ito-Yokado supermarket unit by a quarter and quit its apparel business to focus more on the convenience store operations.