Monday, June 05, 2006

Murakami: Legitimate Activist?

Forty-six year old former Ministry of Finance (known as "MoF") official Yoshiaki Murakami was arrested having admitted that he used material non-public information to profit from Livedoor's takeover of Nippon Broadcasting (TSE Code#4660). Bloomberg reported that Ken Siegel, Senior Partner at US lawfirm Morrison & Forrester (amusingly known as MoFo) commented that " would be a shame if this discourages legitimate shareholder activism."

Which begs the question: "What is legitimate shareholder activism?". It also begs the question: "What is legitimate management intransigence and what constitutes cynical self-serving behaviour?" Is this culturally determined, since there are many flavours of capitalism that have evolved in the world, distinct from the American version where the owner is "king" and all else, labour included, is meat for the grinder.

As is most often the case, reality probably lies somewhere in between Daniel Loeb's obnoxiously delicious missives, and Tokyo Style's (TSE COde# 8112) deliciously obnoxious disregard for their financial partners (i.e. capital). But it IS important to recognize that, in many places, the form of the limited liability corporation has many uses. In many instances, it is NOT to provide immediate rewards to shareholders, as the case may be in France or Belgium, where the "holding company" is effectively a legal tax dodge affording the owners to avoid various pecuniary wealth and generational estate taxes, while maintaining the benefit of effectively private control over one's business affairs. And indeed, the same may be said of many second-section listed subsidiaries in Japan.

Here I make no judgement of the relative merits such organization and [lack of] profit-maximizing business objective, for I believe that while profit-maximization affords certain disciplinary benefits, I believe that the large corporation legitimately serve multiple constituents - not least, shareholders, employees (including management), the community, and suppliers (probably in that order). And I also believe that many of these constituents are best served (shareholders included I might add) by longer-term vision and investment rather than shorter-term maximization strategies (meeting quarterly earnings forecasts, or the incipient year's profit growth), that might reward "activists", but impoverish the other constituents (including longer-term shareholders).

From my perspective, I might make one observation that I have learned in my years of experience that separates the "mouse that roared" from the "real men" of financial substance. And that is: possession in nine-tenths of the law. This is to say, if you are not prepared "to own it" (bid for majority control) and run it (take it private), or are not able to do either due to majority stake-holders, you've got nothing to say.

1 comment:

Anonymous said...

Any thoughts on Steel Partners or Wilbur Rosss?