Corporate Governance in the 21st Century
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Corporate Governance in the 21st Century

Japan’s Gradual Transformation

Edited by Luke Nottage, Leon Wolff and Kent Anderson

The ‘lost decade’ of economic stagnation in Japan during the 1990s has become a ‘found decade’ for regulatory and institutional reform. Nowhere is this more evident than in corporate law. In 2005, for example, a spate of reforms to the Commercial Code culminated in the new Company Act, a statute promising greater organisational flexibility and shareholder empowerment for Japanese corporations competing in a more globalised economy. But does this new law herald a more ‘Americanised’ system of corporate governance? Has Japan embraced shareholder primacy over its traditional loyalty to other key stakeholders such as ‘main banks’, core employees, and partners within diffuse corporate (keiretsu) groups? This book argues that a more complex ‘gradual transformation’ is unfolding in Japan – a process evident in many other post-industrial economies.
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Chapter 7: Streamlining the Market for Corporate Control: A Takeovers Panel for Japan?

Geread Dooley


Geread Dooley Japan Inc. has been shaken, its foundations jolted. The person primarily responsible is Takafumi Horie. In 1996 Horie dropped out of Japan’s prestigious University of Tokyo and founded Livin’ on the Edge, a website design consultancy company, with just US$52 000. Employing an unheralded mergers and acquisitions (M&A) strategy the brash entrepreneur engineered the purchase of more than 50 companies. Such raw capitalism and entrepreneurial vitality has rarely been seen in post-war Japan. By December 2005 the company, now known as ‘Livedoor’, had a market value of US$7 billion (based on annual sales of just US$661 million for 2005). Horie had acquired celebrity status. Spurred on by Horie’s aggressive manoeuvres and abrupt success, the unthinkable has occurred: takeover activity is on the rise in Japan – a country famous for the illiquidity of its stock exchange and tightly held companies. Unintended consequences have occurred. Japanese corporate conventions such as relationship-based business decisions and the veneration of organic growth have been challenged. Corporate Japan, some say intent on preserving the status quo, has used Horie’s challenge as a pretext for implementing management-preserving corporate rules, including versions of the notorious US-style ‘poison pill’ defences (Milhaupt, 2005a, p. 2171). The poison pill defence – especially in the Anglo-Commonwealth tradition – is often regarded as a pro-management device capable of locking-in insular boards, prone to inhibit the market for corporate control. Undeterred, Japanese lawmakers have partially endorsed the poison pill. As outlined in this volume’s Chapter 8 by Kamiya and Ito,...

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