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 9: Open to Being Closed? Foreign Control and Adaptive Efficiency in Japanese Corporate Governance

Christopher Pokarier


Christopher Pokarier How open is Japan to foreigners taking control of Japanese enterprises and what does it say about this book’s theme of the ‘gradual transformation’ of Japan’s corporate governance? Japan is formally very open to foreign direct investment (FDI), excepting certain, perhaps increasingly, ‘sensitive’ sectors. The Japanese Government seeks to have inbound FDI double to about 5 per cent of GDP by the end of 2010. Realisation of this objective is likely to entail more corporate control events involving foreign acquirers. While greenfield investments are occurring in some sectors, in many others FDI typically takes the form of acquisitions of existing enterprises, given the maturity of Japan’s economy (ACCJ, 2003). In 2008 this disconcerts few in economies such as the United Kingdom and Australia. Yet, in the Japanese business and policy zeitgeist of 2008, widespread ambivalence about the foreign control of Japanese firms and infrastructure can be readily discerned. As explored elsewhere in this volume, notably in Chapters 7 and 8, recent corporate law and regulatory developments give firms considerable latitude to build protections against unwelcome control events. While provisions are not directed exclusively at foreign investors, and were indeed made topical by several contentious domestic hostile takeover bids, the explicit rationale of many of the anti-takeover defences put in place by firms has been the potential threat of a hostile foreign bid. Yet since the late 1990s there has been a growing volume of friendly inbound merger and acquisition (M&A) activity, in addition to dramatic growth in...

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