John Buchanan, Dominic Heesang Chai, and Simon Deakin: Hedge Fund Activism in Japan: The Limits of Shareholder Primacy. New York: Cambridge University Press, 2012. 377 pp. $99.00, hardcover.
This book documents the rapid rise, temporary success, and eventual failure of publicly confrontational hedge fund activism in Japan and investigates why Japanese corporations’ reactions to the emergence of hedge funds differ from those of corporations in the U.S. and U.K., regardless of the high degree of commonality in their legal environments concerning corporate governance. According to the authors, the growth of confrontational hedge funds in the late 1990s in markets in the U.S. and U.K. rested on the shareholder primacy model of corporate governance, in which increased shareholder value was widely accepted as the primary objective of corporate activities. In this model, senior managers need to serve the interests of all shareholders and are expected to increase dividends and buy back stocks to return their reserves to the ultimate owners, the shareholders. In contrast, operating in legal environments similar to those of the U.S. and U.K., Japanese corporations follow the community firm model, in which corporations are considered more than a collection of tradable securities and are expected to serve various interests of community members, including but not limited to employees, commercial banks, cross- shareholding partners, distributors, and corporate customers. In this model, senior managers and boards need to pay more attention to internal stake- holders than to shareholders and to prioritize the economic security of their corporations’ business and long-term organizational survival over financial interests and value.