Meet Shinzo Abe, shareholder activist
Winds of change
“Stupid, greedy, adulterous, irresponsible and threatening.” At least the Japanese vice-minister for the economy, speaking about equity investors in 2008, was being honest. Indeed, he could not have summed up most Japanese politicians’ contempt for shareholders any more pithily. But as Shinzo Abe, the prime minister, tries to boost a flaccid economy, official attitudes are changing at last.
Japan’s companies are sitting on ¥231 trillion ($1.9 trillion) in cash, an amount nearly half the size of the economy itself. Mr Abe wants that hoard to boost capital expenditure or wages, or to be returned to investors, who could put it to better use. He thinks a dose of shareholder capitalism will do the trick. Government bigwigs, including Mr Abe himself, now offer meetings to foreign activist investors. A new governance code, which came into force this week, seeks to break open the cosy world of the Japanese boardroom by requiring firms to appoint at least two outside directors.
Big deal, say the sceptics. Japan’s corporate-governance revolution has had many false dawns. However keen the politicians now are on a bit of Anglo-Saxon greed and menace, firms themselves retain a deeply insular culture. Only 274 of some 40,000 directorships are held by foreigners. A mesh of shareholdings still binds big firms together. Japan’s business lobby group, Keidanren, fought to dilute the new reforms. The banks still keep weak companies afloat: the fact that not one of Japan’s listed firms went bankrupt last year, for the first time since 1991, reflects not just a zippier economy, but also lenders’ clubby ties to borrowers. For all his reformist zeal, Mr Abe has yet to embrace measures that make it easier for firms to hire and fire. Hobbesian, Japan is not.
Even so, there are three reasons to think that real change is under way:
- The first is that market pressure is adding to the political pressure.
- Some of Japan’s most prominent companies are also changing their stripes.
- Third, the need for firms to absorb hard-to-employ Japanese workers is diminishing.