Answering Boone Pickens: his stake, his board seats, his dividend (1989)

The company its largest shareholder could not move

The heart of this defence lies in the fact that even a largest shareholder holding more than a quarter of the issued shares could not move the company, so long as the keiretsu and its cross-shareholdings held. Koito’s board carried the general meeting on the will of its stable shareholders rather than on holdings, and gave Pickens neither a seat on the board nor sight of the books. Asked which came first — the interests of shareholders, or the autonomy of management — Koito answered by choosing the continuity of its keiretsu with its trading partners. The Japanese joint-stock company, in which ownership is severed from control, was distilled into that one meeting.

Pickens, however, had a weakness of his own. That he had never paid for the shares, and was fighting while still bound by the collateral held by Watanabe, whose greenmail had failed, cut the ground from under his appeal to shareholder value. There was real merit in the criticism of the keiretsu; but the fact that the criticism was carried by a nominee shareholder of little substance left Koito the room to counter-attack. Even so, an affair in which a foreign investor put the question “whose company is this?” to a Japanese general meeting left behind a question that anticipated the later unwinding of cross-shareholdings and the spread of shareholder activism.