Steel Partners Is an "Abusive Acquirer"
Last week, the Tokyo High Court handed not only a defeat but a tongue lashing to US hedge fund Steel Partners. In upholding a lower court decision that would allow Bull-Dog Sauce Co. (2804) to issue stock warrants as a takeover defense, the Court labeled the American firm an "abusive acquirer" solely focused on making a short-term to medium-term profit. As described in this story from Nikkei Net (subscription required), the Court gave this explanation of why Steel's activities were wrong:

The high court...defined a stock company as a for-profit organization that makes distributions to shareholders by maximizing enterprise value. But "it cannot pursue profit on its own because profit is generated through economic activities with employees, consumers and others," explained the ruling.

Darrel Whitten has a nice roundup of recent events at his The Japan Investor. He notes that:

The high court ruling came as a shock to Steel and those hoping that activist investors would shake things up enough to accelerate Japanese management's slow and reluctant shift to shareholder capitalism. Heretofore, the perception was that the courts in Japan were protective of shareholder rights.

It's been interesting to talk to friends in Japan and read commentary on Steel in the Japanese press, like this piece from Business Media Makoto. The concept of the corporation as something more than the creature of shareholders -- ie, a true community of stakeholders comprising employers, suppliers, customers, etc. -- seems to resonate in Japanese society. Shareholders should not simply look out for their short-term gain but rather consider the long-term success of the firm, which may not be the course of action mandated by IRR and discounted cash flow calculations.

To what extent this concept is truly felt by the Japanese public, and how much is simply rationalizing a dislike for the external, foreign, unsettling forces Steel represents, is hard to say. In many ways, Japan remains extremely, even oddly, conservative, and the antipathy shown toward Steel's motives is more than just a manifestation of xenophobia. It will be interesting to see if other American funds, or even Steel itself, can repackage and rebrand itself so that what it is selling is more palatable to the nation's shareholders.