Group 15_KOITO Manufacturing Ltd

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Transcript of Group 15_KOITO Manufacturing Ltd

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    Two main governance systems are discussed in the case. One is insider system(Japan) and other is outsider system (US). In outsider system the control rights andcash flow rights are linked together. US believe on free trade and several outsideinvestors. Shareholders has supreme power. On the other hand Japan follows insidersystem which is also referred as keiretsu. The groupings of suppliers, dealers, insurerswithin the same keiretsu had remove competition. And at the same time they allwere shareholders of the company. The central Bank and other financial institutionshave close relationship with corporations.

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    Koito manufacturing was a big supplier who provides lighting equipments to Toyotaand Nissan. koito supplies were restricted within the same keiretsu. This was theexample of inside corporate governance system. The groupings of suppliers, dealers,insurers within the same keiretsu had remove price competition and make monopolyin the Japanese markets. There was no scope for foreign and outside suppliers toinvest in such circumstances.

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    In Japanese keiretsu system had no scope of foreign investors. Main financialinstitutions and major banks had close relationship with corporates. And at sametime they were key shareholders of corporations in japan. Like in the given casecorporations and financial institutions with which Toyota had business dealingsowned 87.7% of its share and individual shareholders held only 9.3% of Toyota'scommon stock.

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    The fact that he bought shares from Watanabe at an undisclosed price and alsorefused to share details regarding how the shares were financed,, it is safe to assumethat T. Boone Pickens, like Watanabe, wanted to greenmail Toyota and Koito so thatthey buyback the shares from him at a price than what he paid to acquire thoseshares.

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    This denial of representation by Koitos board is a depiction of a custom which wasreferred to by Takao Matsuuura, President of Koito, who said that it is not a norm inJapan that the major shareholder is entitled to representation on the board.

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