STORIES FROM JAPAN
Many of the following articles appeared in a local Japanese law firm periodical. For most of its readers, English is a second language. For that reason, I have used simple writing for a Japan readership.
These articles are written to give readers a basic understanding of topics of interest or significant law issues with which I am most familiar. As with all information on this web site, they are not legal advice, should not be relied on as legal advice and do not create an attorney-client relationship with me. If you have a need for legal advice or support, please make contact with my office for an appointment.
Advice On Cutting-Edge Technology
Sharp Corp. is facing a difficult choice--whether to advance into the Chinese market, which may involve the risk of its cutting-edge technology being leaked, or prioritize its domestic plant operating ratio.
The Chinese government is demanding that Sharp change its plan for a new LCD panel factory in Nanjing so that it provides its latest "10th-generation" technology rather than the older "eighth-generation" as initially planned.
Years ago, when I was first building a Japan legal practice, I was brought to Japan by Sharp to advise it on how better to analyze international deals. In advising Sharp, I specifically asked its managers to examine this very issue. I asked its managers to consider the return on investment as well as the risk. I said “It's not enough that they simply make profits. If the profits they repatriate . . . are not enough to pay for the R&D that created that technology, then there's something wrong with the deal.”
The institutional memory of that advice probably remains, as Sharp managers are good ones. For more on my advice, see the interview by clicking on the heading above.
Pros and Cons of M&A
Last month I was surprised by an event regarding a major part of my legal career -- my long involvement with mergers and acquisitions. Alberto Culver, a US “Fortune 500” company of which I was once Vice President and General Counsel, has agreed to be acquired by Unilever.
For me, this is a sad milestone. Although I have personally been involved in over 125 purchases and sales of companies and divisions, all four of the big multinational companies for which I worked -- Gillette, Monsanto, Household International and now Alberto Culver -- have themselves at last been absorbed by even larger companies. The “big fish” have been eaten by even bigger fish. Read more
Ambassador Who?
It is fair to say that most people in Japan have never heard of John V. Roos, a corporate lawyer from California. Even those who have heard the name do not understand why he was appointed by President Barack Obama as Ambassador of the United States to Japan.
Roos has little obvious connection with Japan. Why was he chosen? Perhaps I can explain from my own perspective as a fellow corporate lawyer and knowledge of his unique professional qualifications. Read more
Small Errors Costly
I have written earlier on how I became a creator of currency swap and hedge agreements, which led to a variety of other financial derivative instruments -- and which have been a partial cause of today's worldwide economic troubles. See Fuji Diary 19, Winter 2004. One of those agreements involved a quite different issue -- an issue that involves a much more common job for lawyers, which is writing good documents and avoiding typographical errors (typos). Read more
Bankers and Huge Risks
I very much like bankers as a profession and as people. As a general rule, persons in the finance industry are well educated, well spoken, and well dressed. Some have a great sense of humor -- it always seems that they are inventing clever new terminology for what they do. Investment bankers in particular always seem to know the latest jokes. They also present themselves as highly expert in valuing the quality of investments and how to make money, which is one of the supreme skills.
If that image is wrong, then the actions they take can have dangerous consequences that affect us all. While the industry has a reputation of being conservative and low risk, the reality is quite different. Let me give some examples. Read more
Subprime Lending Crisis—Another Perfect Storm?
"Subprime loans" are loans to low quality, high credit-risk borrowers. Because of that higher risk, lenders of such loans always charge higher rates of interest and demand stricter terms.
At this moment (March 2008), certain elements of such loans have caused a crisis in the United States economy -- and thus in other world economies as well. We cannot yet know how bad it will be, but it is quite serious and it affects all kinds of financial institutions. Here is a short explanation of why this happened, based on my years of experience with such loans. Read more
Challenges of a Global World For Japan Real Estate
“Everyone wants economic growth, but nobody wants to change.” Thomas L. Friedman in “The World Is Flat, the Globalized World in the Twenty-First Century.”
We know change is necessary, but in a global world, often we do not realize how urgent it is -- and how quickly we must abandon current business methods. Here in Kansai (central Japan), this is especially important if we are to bring this economy back to its historic prominent role in Japan and the world. This area has been the business and creative center of Japan for centuries. There is no reason why it cannot be that again.
One area we need to examine is making more efficient use of land and buildings in Japan, discussed below. Read more
Irasshaimase Dozo!
Enter, please! Japan has officially decided to attract foreign investors.
Former Prime Minister Koizumi's administration has officially accepted the idea that Japan needs more capital investment, as well as foreign management and business concepts, to stimulate the still-lingering bad economy. Despite there having been 15 years since the end of the so-called “good days” of the bubble economy, only now does it seem that the government recognizes that many existing fiscal and business practices are no longer valid and new ones, perhaps from outside Japan, are needed.
The weakness of such practices, in my view, is seen most dramatically outside Tokyo, in areas such as Kansai (Osaka-Kyoto-Kobe) that have suffered more greatly. Local governments are in a terrible state, hopelessly in debt for extravagant public works projects that no one besides bureaucrats (and interested parties) could imagine were proper.
Read more
The Rules Apply In Both Golf and Takeovers
A talented, attractive young woman has suddenly changed the sport of golf. Michelle Wie of Honolulu, barely 16 years old (in October 2005) and able to drive a golf ball over 300 yards, has elected professional status, beginning with $10 million of endorsement contracts from Nike and Sony, far higher then ever seen before in women's sports.
However, in her first golf tournament as a pro, she violated the rules, resulting in her being disqualified.
This event reminds me of a subject on which many in Japan are focused today. Companies in Japan are seeing a wave of both friendly and hostile takeovers. Managers are looking at ways to defend their companies.
As with Michelle Wie, we are seeing errors that should have been avoided. This is especially striking to those of us involved in the takeover battles of the past 30 years in the United States, and who understand how the rules developed there. Even the smartest, most talented businessmen would be apt make mistakes about the much more complex rules of takeovers -- especially in a period in which the rules are changing.
Read more
The Landmark Poison Pill Case
A wave of corporate takeovers is about to sweep across Japan. Now is the time to examine how to deal with it and to implement procedures, because management decisions now can forestall mistakes later.
It was my fortune, for good or ill, to be in the center of one of the most significant takeover battles ever held in the United States. The outcome was finally settled in the Supreme Court of the State of Delaware, where many large American corporations are incorporated and which has the best-established case law on a company law matters.
Our case, which we won, validated the “Poison Pill” anti-takeover device, later adopted by perhaps five thousand other American companies. It also provides an excellent example of how to build valid protections that will withstand challenges. Read more
Who Invented Financial Derivatives?
Some authorities view derivatives as the most significant financial development of the 20th Century. Many people contributed to this complex and enormously successful range of financial products. However, the key moment seems to have been in a London conference room in the mid-1970's, when four American and British lawyers took the vital steps that led to a multi-trillion dollar industry. Read more
Employee Inventions In Japan
Why is Japan suddenly facing a problem as to company liability for employee inventions? Within the past several months, some rather startling court judgments have issued, awarding very large amounts of money to employees of companies like Hitachi, Ajinomoto and Nichia for compensation for important inventions made in the course of working for such companies. In the case of the famous blue light emitting diode, patented by Nichia, a relatively small company, the inventor was awarded 20 billion yen.
How do Japanese companies find themselves in such a threatening situation today, while companies in other countries seem to have avoided this?
Read more
Spalding Restructured Again
On September 4, 2003, a United States federal bankruptcy court approved the sale of the assets of Top-Flite Golf Corp. Top-Flite, which is the former Spalding Sports Worldwide and the first American manufacturer of golf clubs and golf balls, was sold to Callaway Golf Company, currently the world's largest golf club manufacturer.
This puts an end to the independent operations of one of the most famous American manufacturers of sports equipment. In reality, Spalding has changed owners many times before, but the current sale was done under a court’s supervision to accomplish certain results available only under the United States bankruptcy laws. Read more
Your legal strategist in Japan • Finding Business Results That Work • Our Objective Is Extraordinary, High Value Outcomes