Chapter 10: Management–shareholder relations in Japan: what’s next after cross-shareholdings?
In Japan, corporate law endows shareholders with strong voting rights. In reality, though, the practice of cross-shareholding has “blocked” the effective exercise of these rights. This situation is now in flux. The sluggish stock market since the 1990s has caused significant losses on cross-held stock positions. Corporations, particularly banks, have found it increasingly difficult to justify the practice of holding each other’s shares. The goal of this chapter is to shed light on the direction in which management–shareholder relations in Japan are likely to evolve in the new era. The starting point is the understanding of historical patterns elsewhere in the world. Three distinctive patterns of management–shareholder relations are identified as “model” cases. These are the board primacy model of the US, the reference shareholder model still prevalent in continental Europe, and the collective engagement model that arose in the United Kingdom. I will describe their features and discuss the patterns in Japan from a comparative perspective. This chapter is organized as follows. Section 10.2 sets the stage for subsequent discussions.
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