JAPAN'S SHAREHOLDERS QUIETLY FORCING IMPORTANT

UNCLAS SECTION 01 OF 03 TOKYO 001550

SENSITIVE
SIPDIS

DEPT FOR EAP: HASLACH
ALSO FOR EEB/IFD: KAMBARA
NSC FOR TONG
DEPT PASS USTR FOR CUTLER AND BEEMAN
USDOC FOR 4410/ITA/MAC/OJ
JUSTICE FOR ANTITRUST DIVISION - CHEMTOB
TREASURY DEPT FOR IA/CARNES AND POGGI
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: EINV ECON OECD JA
SUBJECT: JAPAN'S SHAREHOLDERS QUIETLY FORCING IMPORTANT
CHANGES

REF: A. TOKYO 1495


B. TOKYO 1353

C. TOKYO 1337

D. 07 TOKYO 3689

Sensitive But Unclassified. Please Protect Accordingly.


1. (SBU) Summary: The 2008 annual general shareholder
meetings of Japanese listed companies taking place this month
are likely to be less contentious than last year's meetings,
with only about half of the number of shareholder proposals
up for debate. Fewer proxy fights do not mean activist funds
are abandoning Japan. Rather, investors are altering their
strategies in the wake of last year's defeats and, at the
same time, still grappling with the fallout of a July 2007
court decision that cited shareholder support in justifying a
controversial corporate takeover defense. Until Japanese
companies succeed in boosting their share prices and reducing
excessive cash holdings, there will continue to be incentive
-- and opportunity -- for shareholder activism in Japan. End
Summary.


2. (SBU) Because of certain peculiarities of Japan's Company
Law and the fact that most Japanese companies use an
April-March fiscal year, approximately 53 percent of Japanese
listed companies will hold their annual general shareholder
meetings (AGMs) during a ten-day period beginning June 18 and
peaking June 27. In recent years, these meetings have become
fora for activist shareholders to seek changes in corporate
behavior over the objections of management. Again this year,
several private equity funds are seeking shareholder support
for dividend hikes or other corporate governance changes in
targeted companies. There was already one dramatic result
when U.S. hedge fund Steel Partners joined other
institutional investors to oust the board of Aderans
Corporation at its May 28 AGM (ref A). More surprises may be
possible in the weeks ahead but, overall, the number of
contentious meetings is likely to be far fewer than last
year.

Many Boards Seek to Boost Defenses
--------------


3. (U) More than 200 corporate boards will seek shareholders
approval of new or renewed takeover defense plans at this
year's AGM, according to a Tokyo-based equity analyst who
follows these issues. He sees continuation of a trend that
began with adoption of the 2005 Company Law. Added to the 86
companies that have adopted defensive measures by board vote
since September 2007, the number of companies having takeover
defenses in place, if shareholders approve all of
managements' proposals, would rise to over 500, almost
one-fifth of 2,414 Tokyo Stock Exchange (TSE) listed firms.


4. (SBU) This latest push for shareholder approval for
takeover defenses is, in part, fallout from the July 2007
ruling in the Bull-Dog Sauce Co. case, in which Japan's
Supreme Court refused to block implementation of the
company's "poison pill" defense plan, citing earlier,
overwhelming shareholder approval of the plan at the
company's 2007 AGM (Ref D). Although shareholder approval
of takeover defenses is technically unnecessary