Land of the Falling 'Poison' Pill: Understanding Defensive Measures in Japan on Their Own Terms

41 University of Pennsylvania Journal of International Law, Forthcoming

NUS Law Working Paper No. 2019/002

NUS Centre for Asian Legal Studies Working Paper 19/02

NUS EW Barker Centre for Law & Business Working Paper 19/02

60 Pages Posted: 19 Feb 2019 Last revised: 19 Apr 2019

See all articles by Alan K. Koh

Alan K. Koh

Nanyang Business School

Masafumi Nakahigashi

Nagoya University - Graduate School of Law

Dan W. Puchniak

National University of Singapore (NUS) - Faculty of Law

Date Written: February 7, 2019

Abstract

Embraced by US managers in the 1980s as a lifeline in a sea of hostile takeovers, the poison pill fundamentally altered the trajectory of American corporate governance. When a hostile takeover wave seemed imminent in Japan in the mid-2000s, Japanese boards appeared to embrace this American invention with equal enthusiasm. Japan’s experience should have been a ringing endorsement for the utility of American corporate governance solutions in foreign jurisdictions – but it was not to be. Japan’s unique interpretation of the “poison pill” that was so eagerly adopted by Japanese companies in the mid- to late-2000s has turned out to be nothing like their potent American namesakes – and, in fact, the opposite of what would be expected by leading US academics who have built a cottage industry publishing on the US poison pill.

Based on hand collected empirical data, we provide the first in-depth analysis for why Japan’s “poison pill” (defensive measures) is heading towards extinction – a watershed reversal that is unexplained in the Japanese literature and has almost entirely escaped the English language literature. By drawing on our hand collected data, case studies, and Japanese jurisprudence, we illuminate the unique and untold story of how one of the most discussed mechanisms of American corporate governance has worked almost entirely differently when transplanted to Japanese soil – the importance of which is heightened as Japan is by far the largest economy in which the poison pill has been tested outside of the United States. In addition, our analysis sheds light on the unexpected importance of Japan’s recently implemented corporate governance code and stewardship code – two Western legal transplants that have garnered considerable attention in the English language literature, but which have yet to be evaluated in light of their impact on defensive measures in Japan.

Keywords: comparative corporate law, comparative corporate governance, Japan, hostile takeovers, poison pill, corporate governance codes, stewardship

JEL Classification: K22, G34, G30, G32, G38, M14, N25

Suggested Citation

Koh, Alan K. and Nakahigashi, Masafumi and Puchniak, Dan W., Land of the Falling 'Poison' Pill: Understanding Defensive Measures in Japan on Their Own Terms (February 7, 2019). 41 University of Pennsylvania Journal of International Law, Forthcoming; NUS Law Working Paper No. 2019/002; NUS Centre for Asian Legal Studies Working Paper 19/02; NUS EW Barker Centre for Law & Business Working Paper 19/02. Available at SSRN: https://ssrn.com/abstract=3332481 or http://dx.doi.org/10.2139/ssrn.3332481

Alan K. Koh (Contact Author)

Nanyang Business School ( email )

Nanyang Technological University
Block S3, 50 Nanyang Avenue
Singapore, 639798
Singapore

HOME PAGE: http://www.alankkoh.com

Masafumi Nakahigashi

Nagoya University - Graduate School of Law ( email )

Furo-cho, Chikusa-ku
Nagoya, 464-8601
Japan

Dan W. Puchniak

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore
(65) 6516 3625 (Phone)

HOME PAGE: http://law.nus.edu.sg/about_us/faculty/staff/profileview.asp?UserID=lawdwp

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