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 8: Corporate Governance at the Coalface: Comparing Japan’s Complex Case Law on Hostile Takeovers and Defensive Measures

Mitsuhiro Kamiya and Tokutaka Ito


Mitsuhiro Kamiya and Tokutaka Ito 1. INTRODUCTION In Japan, corporate governance issues were not discussed seriously until quite recently. This was primarily due to the so-called ‘main bank’ system (introduced in this volume’s Chapter 4 by Puchniak) and Japanese-style cross-shareholding (kabushiki mochiai), which predominated during the era of high-speed economic growth achieved in post-war Japan. Main banks, highly regulated and influenced by the Ministry of Finance (MoF) under the infamous ‘convoy system’ (goso sendan hoshiki, whereby banks moved at the speed of the slowest), effectively directed the management of the Japanese companies.1 Crossshareholding among business partners, including banks, reflected and promoted strong solidarity in the Japanese business world. These two factors, along with the lifelong employment system (introduced in Wolff’s Chapter 3), significantly contributed to Japan’s unprecedented economic growth. Understandably, as long as such economic growth continued, the non-existence of truly effective corporate governance and the ‘dark’ side of the main bank system and cross-shareholding were not of major concern. As long as Japanese companies were protected by their main banks and stable shareholders, the management of such companies did not have to face corporate governance issues. One exception was when they were illegally ‘threatened’ by corporate racketeers (sokaiya: Milhaupt and West, 2000). Yet even this issue tended to be treated as an issue of compliance (abiding by the law) rather than broader governance (how to manage companies efficiently and legitimately for stakeholders). 1 This chapter focuses on publicly traded companies, unless otherwise stated. 178 Corporate governance at the coalface...

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