Japanese firms fight Abenomics with poison pills

July 29, 2015 1:10 PM (UTC+8)

 

One of the three arrows of Abenomics, the plan by Prime Minister Shinzo Abe to fix Japan’s economy, was market and business reform. Not surprising, those with the most to lose are fighting back.

Abe want public companies to give their investors more say in the way the firms are run. Executives at Japanese companies don’t like that. They saw what happened in the US when investors were able to make their voices heard. Executives were held accountable and some were even fired for poor management.

Japanese PM Shinzo Abe
Japanese PM Shinzo Abe

In boardrooms across the nation, managers have shown their reluctance to buy into the premier’s plans by instituting poison pills, a tool companies use to stop hostile takeovers. Poison pills typically give stockowners the right to buy more shares to dilute the holdings of an acquirer.

At least 20% of firms in the benchmark Topix index have instituted poison pills, compared with 5.8% on Wall Street’s Standard & Poor’s 500 Index, reported the Japan Times.

“Hostile takeovers in Japan are like plane crashes. They hardly ever happen,” Takeyuki Ishida, head of Japan research at Institutional Shareholder Services told the Japan Times. “Yet Japanese corporations are afraid and want to protect themselves.”

The pills go against the nation’s attempts to make Japanese executives accountable in the market for their performance, Hiroyuki Nagamatsu, an M&A adviser at Deloitte Tohmatsu Financial Advisory in Tokyo, told the Japan Times. “Adding these pills doesn’t go down well with investors.”

Since June, firms are also required to justify the economic rationale for keeping cross-shareholdings, another protection against takeovers.

Poison pills “serve to protect lower-quality companies,” Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan in Tokyo told the paper.

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