A London-based activist investor has fired off a series of letters to the directors of two Japanese companies largely owned by their founding families saying they are responsible for share prices at ¡°extremely depressed¡± levels.

The shares of Tsutsumi Jewelry and staffing services provider Pasona Group are being allowed to stagnate to the detriment of minority investors, Satoru Matsuhashi, a representative at Nanahoshi Management (U.K.), said in letters to the firms.

While shareholder activism in Japan has intensified in recent years as the government and Tokyo Stock Exchange have aggressively pushed corporate governance reforms, campaigns targeting founding families with large majority shareholdings have remained relatively rare. Pasona and Tsutsumi both declined to comment when contacted.

Tsutsumi shares currently trade at a price-to-book ratio of about 0.6 times, based on compiled data, well below the level of 1 that would indicate they are equivalent to the accounting value of the company¡¯s net assets. The corresponding level for Pasona is also about 0.6 times, while that of the Topix index is about 1.8.

As the Tokyo Stock Exchange strengthens initiatives such as minority-shareholder protection, ¡°engagement between institutional investors and founding-family-led firms is also accelerating,¡± said Atsushi Kamio, a senior researcher at Daiwa Institute of Research in Tokyo. The process is forcing some managements to decide whether to stay in the public domain or exit through a buyout, he said.

A potential conflict of interest related to inheritance taxes in companies run by founding families was mentioned in a paper published last year by the Tokyo Stock Exchange.

¡°Some owner-managed companies say that they do not want to increase dividends because it would raise their taxes and that they do not want to raise their stock prices because inheritance taxes are tied to the prices of their listed shares,¡± according to the paper published in September. ¡°They are not interested in increasing their corporate value, and this creates conflicts of interest with their minority shareholders.¡±

Investors at Tsutsumi¡¯s annual general meeting last June questioned whether shares were intentionally being kept depressed to benefit the founding family from an inheritance tax-planning perspective, Matsuhashi said in a letter sent to the founders in November.