Pricing of Shareholder Derivative Actions in Japan and the United States
![handle is hein.journals/illlr88 and id is 1452 raw text is: Copyright 1994 by Northwestern University, School of Law Printed in U.S.A.
Northwestern University Law Review Vol. 88, No. 4
THE PRICING OF SHAREHOLDER DERIVATIVE
ACTIONS IN JAPAN AND THE
UNITED STATES
Mark D. West*
I. INTRODUCTION
A monolithic vision of Japanese corporate governance is deeply em-
bedded in the academic literature. As the story goes, shares in Japanese
corporations are concentrated in friendly hands with stable institu-
tional shareholders forming intricate webs of reciprocal shareholdings
known as keiretsu. Keiretsu and other corporate affiliations insulate
managers from short-term pressures and help Japanese firms weather
economic hard times. Given this structure, the Japanese response to the
Berle-Means corporate governance problem' is simple: monitoring is
conducted informally (and, many argue, quite effectively) through
keiretsu and main banks.2
The same conventional wisdom holds that with keiretsu member
companies functioning as co-monitors, directors of Japanese corpora-
tions, unlike their U.S. counterparts, need not worry about one weapon
* Associate, Paul, Weiss, Rifkind, Wharton & Garrison, New York (beginning September
1994). B.A., Rhodes College; J.D., Columbia University. This Article was written while I was,
consecutively, Kaoru Kashiwagi Fellow in Japanese Law, Center for Japanese Legal Studies, Colum-
bia University School of Law, and Law Clerk to the Honorable Eugene H. Nickerson, United States
District Court, Eastern District of New York. I am grateful for the helpful comments, suggestions,
and encouragement that I received from Karan Bhatia, Curtis Milhaupt, Mark Ramseyer, Mark
Roe, and especially Michael Young. Special thanks also to Richard Jennings, Toshiomi Katsumata,
and Charles Stevens for their assistance in procuring obscure sources.
1 The Berle-Means corporate model, which emphasizes the separation between ownership
(shareholders) and control (managers), has become the leading model of the firm and a necessary
starting point for examining corporate governance issues. See ALFRED BERLE & GARDINER
MEANS, THE MODERN CORPORATION AND PRIVATE PROPERTY (rev. ed. 1967) (1932); infra text
accompanying notes 185-87.
2 Japanese corporate governance has become the center of much debate in the United States.
Some of the better known works are JAMES C. ABEGGLEN & GEORGE STALK, JR., KAISHA: THE
JAPANESE CORPORATION (1985); W. CARL KESTER, JAPANESE TAKEOVERS: THE GLOBAL CON-
TEST FOR CORPORATE CONTROL (1991); Ronald J. Gilson & Mark J. Roe, Understanding the Japa-
nese Keiretsu: Overlaps Between Corporate Governance and Industrial Organization, 102 YALE L.J.
871 (1993) [hereinafter Roe, Understanding the Japanese]; J. Mark Ramseyer, Legal Rules in Re-
peated Deals: Banking in the Shadow of Defection in Japan, 20 J. LEGAL STUD. 91 (1991); Mark J.
Roe, Some Differences in Corporate Structure in Germany, Japan, and America, 102 YALE L.J. 1927
(1993) [hereinafter Roe, Some Differences]; and Paul Sheard, The Main Bank System and Corporate
Monitoring and Control in Japan, 11 J. ECON. BEHAV. & ORG. 399 (1989).
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