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BOOK SERIES | Minority Shareholders, Chapter 16: A Grandiose Scheme

Takano's passion drives him to help minority shareholders revolutionize corporate governance in unlisted companies in Chapter 16 of Shin Ushijima's novel.



In this chapter of Minority Shareholders, I continue the story of Norio Takano. He is not a specific person; he is a character created for my book out of some high rollers who had existed during the bubble period.

As a young lawyer, I witnessed the generation of enormous wealth from scratch. A minority shareholder of a family company brought an action to the court and succeeded in taking hundreds and thousands of yen. I saw it firsthand. Ten years after the bubble popped, I started work related to corporate governance. In this book my fictional characters tell the story of problems that persist in joint-stock corporations. What is an organization called a company? What if Norio Takano were reborn in this era?

This story is a work of fiction. Any resemblance to actual characters or organizations is entirely coincidental and unintentional. ー Shin Ushijima

Read earlier chapters of the series.

Minority Shareholders
Cover of the book, Minority Shareholders" by Shin Ushijima.

CHAPTER 16: A Grandiose Scheme

Continuing from Chapter 15: Norio Takano is sitting in his lawyer, Tadashi Ooki's office. He has suddenly become focused on the corporate responsibility of unlisted family companies. Minority shareholders in listed companies can sell their shares on the market, he says to his lawyer. "So what about minority shareholders in unlisted family companies? What can they do? Of unlisted companies, only a few admit the importance of corporate governance."

Expounding on his newfound beliefs, he tells Ooki, "Corporate governance should form the basis of the unlisted company and be regarded as the most important aspect of all.[...]"

"The basis? The most important aspect?" Ooki asks back.

"Yes, what I want to say is that it's the unlisted companies that really need the corporate governance system."


"Be that as it may," says Ooki, "you'll never be able to be a shareholder. Remember? You can only play the role of middleman, nothing but a stalking horse."

"No, listen. When people come to ask me to purchase their shares, first of all, I suggest to them that they should deal with their companies on their own as shareholders when they want to sell their shares. Of course, I promise them my support through the whole process. 

Enter the Grandiose Scheme 

"What does a shareholder mean to a company? Even a shareholder with a minority stake should mean something. I want them to realize this first.  

"I'll encourage them to help establish corporate governance systems in their companies. Even if circumstances may conspire to make me a purchaser of their shares, it's not that I intend to make a profit by reselling them at higher prices. I'll help increase the value of the shares they own. 

"Normally, it's shareholder business, right? Shareholders should keep the management of the company under surveillance and encourage them to manage the business appropriately. It's common in the world for shareholders to choose the management, or even dismiss them when inconveniences arise. Therefore, it is suggested under the Corporate Governance Code that listed companies appoint independent outside directors. 

"I think the same should be applied to unlisted companies. Such surveillance systems may lead to an increase in dividends or reacquisition by a company of its own shares at a high price. If it were promised, shareholders would agree on an increase in the salary of the president, of course, only after an increase in the salaries of employees. And after that, they can sell their minority shares for cash if they want to. 'Slow and steady wins the race.' What do you say?"

"Hmm, fantastic! What a grandiose scheme! 

The Education of Minority Shareholders

"So, now, those minority shareholders heard the story about Auntie Sumida. And in the hope that you will buy their shares, they turn to you like a drowning man grasping at straws, right?"


"Yes, that's right. I'm not reluctant to pay money, but again, when I pay money, I have no intention of reselling the shares for profit. I'd like to help them improve the management of their companies. 

"For that purpose, I'd like them to mull over how to make the most effective use of general shareholders' meetings. Or, I can buy the shares first and then request the company to improve the management at the general shareholders' meeting. That's also fine with me. But you said that it's impossible for me to become a shareholder, rather than just a stalking horse, right?" 

"Well, your plan sounds like a good idea. You want shareholders to realize what they really mean to the company, right? For that, shareholders will need to make themselves present at the general shareholders' meetings. You're absolutely right. The general shareholders' meetings are the biggest and best opportunity to obtain information."

Ooki nodded as if he were impressed. It showed Takano's sincerity and humility. Takano did not stop speaking, as if he were possessed by something.

"First things first, I'm going to let the company put personal affairs aside. Then, I'll encourage management to allow a dividend increase and share buyback. It's totally unacceptable to take the lion's share by selling shares at a high price. I want the company to give much the same chance to the other minority shareholders.

Role of the Stalking Horse

"I'll bring this up at the general shareholders' meeting. If the company rejects the dividend increase or share buyback, I'll act on the procedure for approval of transfer. I don't mind ending up a stalking horse."

"The company will definitely say no, I guess."

"Not necessarily. But I don't care. Either is fine with me. I just want the company to treat its shareholders fairly. Eventually, it will benefit the company too. 


"Why? You enlightened me before, remember? The company is not a mom-and-pop store. Problems related to privilege that a joint-stock corporation enjoys have nothing to do with listing. A mom-and-pop store, that is, sole proprietorship, if it takes a corporate form, becomes a joint-stock corporation. Why do they become a joint-stock corporation despite the cumbersome red tape? Taxation. 

"They will be taxed lower. Mr  Sazo Idemitsu (a founder of the petroleum company, Idemitsu Kosan) used to say, 'A joint-stock corporation is dodgy. It takes the form of a joint-stock corporation only for tax purposes.' In addition, in the case of a joint-stock corporation, the members of the company have limited liability. 

"On the contrary, if a sole proprietorship goes bust, the owner is liable for all the debts of the business. But in the case of a joint-stock corporation, the liability of the company needs not be shouldered by an individual. It can be said that the owner of any corporation is protected by society. 

"In the past, financial organizations such as banks tended to make business owners guarantee the liabilities of their companies, but it is changing. The reason why a joint-stock corporation is provided with such an advantage is that returns from such corporations greatly benefit society." 

Nailing Employment

"That's it." Ooki raised his voice. "You've hit the nail on the head, Takano. Everything is for employment. As opposed to a sole proprietorship, a joint-stock corporation can expand its business. It can last longer. Hence, it can afford to employ more people. 

"If they are employed, they can get a salary…from the corporation, but by extension from societal cooperation."

"Corporation and cooperation? Come on, play on words?"

"No, I'm serious. Why do you think they can get a salary from a company? Because they work for it… To work, they need a job. That is employment. 


"But what is puzzling about employment is that it cannot be guaranteed. If a company guarantees employment, it will go under. If a country as a whole guarantees it, it will be brought to fragmentation like the Soviet Union. 

"So the only way is capitalism by the company, but it is nothing but a means. It makes people feel they have lives worth living. In order for them to feel it's good to be alive and that they are happy, they need to have self-esteem, which can only be born from a profession."

"What if they are physically challenged by nature?"

"That's beside the point. Still, everybody wants to get out of their sheltered lives as much as possible. When they get a salary for working, they may think they have some value. Thus, they can have confidence in themselves, feeling they are facing up to society."

"Facing up to?"

"Yes, facing up to; holding up well in society; receiving no alms; calling it all square."

"Hmm, it's the spirit of independence and self-respect, a teaching of Mr  Yukichi Fukuzawa (a founder of Keio University), right?"

"That's it." 


Time of the Girl with Pearl Earring

Takano breathed in deeply and started speaking with increasing speed. "You mean the ultimate purpose of the company system is employment? That's your theory, right? But it's not that important to me. 

"What matters to me is the fact that a joint-stock corporation is given some privileges by society. It is more acknowledged and protected than an individual like me. Joint-stock corporations didn't exist in the past. The invention of limited liability only dates back to the 17th century. You told me about the United East India Company before, remember? It was around the time of Rembrandt, Vermeer, and the Girl with a Pearl Earring. 

"In my opinion, the question is not whether a company is listed or unlisted, but whether it is a sole proprietorship or a joint-stock corporation. The joint-stock corporation was created by society for a certain purpose, and any company is obligated to satisfy its social needs: that is, the expansion of employment through its existence. 

"To fulfill this obligation, the board of directors should play a key role in managing the company properly to prolong its existence. The owner of the company tends to have their own way, and this is especially problematic in unlisted companies. No one dares to give an opposing opinion to the owner president in particular. 

"That is why I think it is the unlisted companies that really need to have outside directors. The reasons why corporate governance is needed for listed companies can apply to unlisted companies, too." 

"You impress me. I'm glad to see that you understand it to that extent. What you said makes a lot of sense, yet it's hardly ever voiced in the world." Ooki spoke in a businesslike voice, but Takano did not hold back.

The Guts for Change

"You're right, it's true. Nobody cares at the moment. But I wonder for how long it will go on like that. It will definitely change down the road. The real question is whether we have the guts to change it or not, right? What do you think? I think that's what we should work on."

Ooki was flabbergasted at Takano's earnestness. "Takano, I think what you've said is right. But in this world what is right is not always going to be right."


Ooki took a moment of silence deliberately to calm the excitement in the room. He tried to change the topic to some problems which were most likely to arise in reality.

"Anyway, as a matter of fact, even a minority shareholder definitely thinks it better to let go of their shares after an increase in value."

"No, I won't involve myself in the selling of their shares. I'll keep myself away from any business transaction for profit. I would use a different approach if my purpose were focused on making money. I think I know how to earn money very well."

"Yes, nobody in the world doubts that."

"So, Ooki, you take care of the matters relating to money…on a contingency fee basis, will you? I can guarantee the payment of remuneration by a seller to a certain extent. The contingency fee will be paid once the court has passed a decision on the price in a non-contentious case. 

Trusting the Courts for Fairness

"I want you to reach reconciliation only under the involvement of a judge. If the court is involved, I feel we are in good hands. We should proceed with negotiations under such preconditions. I want to play fair throughout the process. If the seller breaks his promise and arbitrarily makes a compromise without our permission, you can charge fees by the hour up until that point."

Ooki snorted as if to say that it was none of his business. He wanted to say that it would not be fair at all if the contingency fee changed to an hourly rate arrangement according to the client's convenience. 

Under an hourly rate arrangement, fees are paid based on the hourly rate of the attorney regardless of whether the legal battle results in success or failure. It is good for lawyers. If a client pays money but loses a court battle, it is the client's loss. A contingency fee is paid only when the client wins a court battle. In this case, the lawyer has to shoulder the risk. So under a contingency fee arrangement, the lawyer should be paid more than under an hourly rate arrangement. 


Takano, who was not a lawyer, was incognizant of the difference.

Takano kept on speaking without noticing Ooki's frustration. "If there is such a company that buys back minority shares for a fair price, it reflects that the company is fairly managed. There may be quite a few shareholders who think, 'I would be satisfied if I were paid a dividend fairly calculated according to the profits or value of the company. In such a case, I wouldn't sell my shares.' 

Calculating Sloppy Management

"What is important is that the company should be fairly managed for its shareholders and all the other stakeholders involved, as is reflected in the Corporate Governance Code. Not only for the owner president. 

"Needless to say, mixing private and public matters is out of the question. Sloppy management on the part of the owner president takes a toll, not only on the shareholders, but also on its customers and employees."

"But Takano, you mentioned a dividend should be paid according to profits. But not all companies can do that. There are a number of companies which own expensive assets but earn only a pittance, so the owners of those companies decline to distribute dividends. 

"For example, there are some companies that run an unprofitable business from forefathers on their expensive ancestral land. If they run a shop selling clogs and sandals in Ginza, for instance, how much profit can they expect? 

"Even if the owner kindly distributed chicken feed as dividends from the very small amount of profit earned, the minority shareholders wouldn't be satisfied. They may think that the shop should make the best use of the land it stands on. They may complain, 'if you want to do business as a hobby, do it on your own land.'"

"It means that the owner should buy back all the shares, right? And if the owner cannot do it, they should sell all the shares to a third party and allocate the money to all the shareholders in proportion to their respective shareholding ratios. It's the only way to satisfy them, right?"


As if on cue, Ooki responded with a conversation filler. "Oh, it sounds like an earth-shattering plan."

Takano gushed with shining eyes. 

Ten Candidates

"Find land left unmarked and put it to better use. If a company's business is unprofitable on expensive land, it should sell itself to another company and allocate the money. The owner, who owns a majority stake and does business as a pastime, can get more than half of the money. With that money, they can indulge themselves in similar pastimes. 

"What I want to say is, don't keep your pastime at the expense of so-called minority shareholders." 

"Wow, it reminds me of the stories from the bubble era. So, all the companies in Japan doing business unsuitable for their valuable ancestral land will be ousted. Is that your plan?"

"Yeah, so it's good for the world, right?"

"Come on, we are talking about unlisted companies. Are you being serious?"

"Absolutely! I'm going to work on corporate governance for those unlisted companies. Some of the owners and presidents of unlisted companies are arrogant and bossy. I do believe that shareholders are the ones to discipline them and make them clean up their acts. 


"I have ten such candidate companies on my plate now. It's only a small portion of unlisted companies in Japan, but I will start off with them."

"Takano, are you sure you know what you're talking about?"

"I'm positive, you've enlightened me. If corporate governance is important for listed companies, it should be important for unlisted companies, too, right? 

"Corporate governance should exist for conducting business aggressively and increasing earning power. It should work to underpin Japan's economic growth too. If so, I think unlisted companies can play a big role in it. 

"I'm sixty-eight. I think I know myself well. Previously, I had never thought of doing something for other people, let alone spoken of it. But Auntie Sumida's case has taught me a lot. 

A Chance to Create Money

"People cannot live only for themselves. I've heard those words many times before, but now, I realize it's actually true. And I have a lot of time on my hands, although a little time ahead of me."

"Give me a break! If you have a little time ahead of you, the same is true for me," Ooki said jocosely.

"You're fine. You'll live long, since you're blessed with nine lives. I'm just a normal person. 


"As for the corporate governance of listed companies, a lot of venerable people are earnestly involved in it with various purposes. Listed companies do not need me. But unlisted companies are left unprotected. 

"Many unlisted companies are being inconsistently managed, which is disadvantageous for minority shareholders. They are being treated unfairly. 

"Paying more dividends; buying back shares at a high price; putting more internal reserves into investment; and utilizing expensive land left abandoned. It's impossible for minority shareholders in unlisted companies to make these things happen. They are kept under suppression and their voices aren't heard. 

"The owners never pay attention to them. That being said, the real problem lies in the company's management itself. In other words, unlisted companies are not being properly managed for the sake of their customers, employees, local communities and shareholders."

"Oh, Johnson & Johnson's 'Our Credo,' right?"

"Exactly. No one tries to touch on the importance of corporate governance for unlisted companies. Unlisted companies receive attention only in the context of business succession. It is, indeed, a national concern, though. That's true. It also gives banks a chance to create money. But important things seem to be left unnoted."

Continues in: Minority Shareholders, Chapter 17: Takano's Burning Heart


Minority Shareholders is a work of fiction and any similarity to real characters, companies and cases is purely coincidental and unintentional. Sign up to join our mailing list and look for the next chapter every Saturday on JAPAN Forward.

Minority Shareholders
Shin Ushijima, Esquire

Author: Shin Ushijima

The founding partner of Ushijima & Partners, lawyer Shin Ushijima has an enormous wealth of experience in international transactions, merger and acquisition, dispute resolution, system development, anti-monopoly law, labor, and tax law. Concurrently, he heads an NPO called the "Japan Corporate Governance Network." And in his leisure moments, he writes fiction. Additional details on Shin Ushijima's career, awards, publications and more are available at his website: Ushijima & Partners, Attorneys-at-Law.