Abstract
In addition to the economic and social changes it brings, globalization is also a driver of legal change. In the field of corporate law its relationship with legal change is usually approached through the competing lenses of convergence and path dependence. This creates a narrative in which globalization, through various processes, forces national laws to converge on economically efficient sets of rules, with some variation being attributed to historically determined idiosyncrasies within individual countries. This chapter raises the point that this narrative is in large part determined by the nature of the interaction of large corporations with globalization; they are embedded in cross border markets which expose them, and the laws which regulate them, to forces driving legal convergence. This, however, is not a typical scenario for economic organizations in general, with many being challenged by globalization in ways which they institutionally have difficulty adapting to. This chapter explores the differing path of legal change in relation to globalization which organizations in such a situation face by comparing legal change in Japanese corporate law to that in the law governing Shoutengai Promotion Associations – a form of organization for retail merchants in Japan which is in such a dilemma.
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Notes
- 1.
- 2.
Particularly La Porta et al. (1998).
- 3.
The case for path dependence in corporate law is most fully made out in Bebchuk and Roe (1999).
- 4.
The number of companies listed on the Tokyo Stock Exchange as of 1 May, 2015 was 3,491. In comparison the total overall number of business corporations (kabushiki Kaisha) was 2,839,291 as of 2012. Statistical Handbook of Japan, available online at http://www.stat.go.jp/english/data/handbook/c0117.htm. Accessed 1 May 2015.
- 5.
Japanese law provides dozens of different forms of incorporated entities which serve a variety of private and public functions. For a comprehensive discussion of these see Mikami (2002).
- 6.
This chapter uses North’s broad definition of organizations as “groups of individuals bound by some common purpose to achieve objectives” with the added caveat that they should be defined by law – thus including incorporated entities while not including purely voluntary forms of association. Organizations with an economic purpose include an array of legal entities such as corporations and cooperatives. The term “economic organization” is here used to distinguish these from other forms of organization with non-economic purposes such as political parties, universities or churches. North (1990), pp. 4–5.
- 7.
See for example Buchanan et al. (2012).
- 8.
Incorporated under the Shoutengai Promotion Association Act, Act No. 141 of 17 May 1962.
- 9.
Hansmann and Kraakman (2001).
- 10.
Hansmann and Kraakman (2001), p. 441.
- 11.
See for example Puchniak (2007) for such a critique.
- 12.
Siems (2014), pp. 230–232.
- 13.
Bebchuck and Roe (1999).
- 14.
See for example Shishido (2000) which discusses the difference between Japanese corporate law on the books and in practice as it existed at that time.
- 15.
Morck and Nakamura (2007), p. 369.
- 16.
From 1987 to 1993 cross shareholdings constituted between 45 and 46 % of shareholdings. Miyajima and Kuroki (2007), p. 81.
- 17.
Gordon (2007) discusses the historical development of the monitoring board and independent directors in American corporations.
- 18.
Abe (2002), pp. 3–5.
- 19.
Abe (2002), pp. 3–5.
- 20.
See for example criticism of the system in Lee and Allen (2013).
- 21.
Pejovic (2014) discusses the lifetime employment system in Japan and its significance.
- 22.
Shishido (2000) refers to this as the company community concept.
- 23.
On the main bank system see generally Aoki and Patrick (1994).
- 24.
Puchniak and Nakahigashi (2012) discuss changes in derivative litigation which, while almost never used prior to 1990 has increased significantly since then.
- 25.
In 1997, for example, the average meeting length was approximately 30 min and at 87.5 % of them no questions were asked. The need to limit Sokaiya racketeers was a major reason for the rigid control placed over meetings. West (1999), pp. 800–801.
- 26.
On the liberalization of the finance system see Horiuchi (2000).
- 27.
Hansmann and Kraakman (2001).
- 28.
This argument was put forward in Gibson (2000).
- 29.
Miyajima and Kuroki (2007), p. 81. The ratio of stable shareholdings fell from 45.2 % in 1993 to 27.1 % in 2002.
- 30.
Kanda (2000), pp. 282–83.
- 31.
Based on the Tokyo Stock Exchanges 2013 Shareownership Survey, available online at http://www.jpx.co.jp/english/markets/statistics-equities/examination/01.html. Accessed 1 May 2015.
- 32.
For a case study of one, see Jacoby (2007).
- 33.
The largest of these, Institutional Shareholder Services (ISS) now has a Tokyo office and issues proxy recommendations for firms listed on the Tokyo Stock Exchange. They were also among those to submit public comments on the Interim Proposal Concerning Revision of the Companies Act in 2012, which led to the most recent amendments.
- 34.
Japan External Trade Organization, Japan’s Outward and Inward Foreign Direct Investment, available online at http://www.jetro.go.jp/en/reports/statistics/. Accessed 1 May 2015.
- 35.
Sony, whose internal reforms in the late 1990s were influential on the 2002 Commercial Code reform, had been among the first Japanese companies to cross list on the New York Stock Exchange. See generally Sano (2001) available online at http://www.oecd.org/dataoecd/6/36/1873238.pdf. Accessed 1 May 2015.
- 36.
Gilson and Milhaupt (2005).
- 37.
Gilson and Milhaupt (2005), p. 350.
- 38.
Gilson and Milhaupt (2005), p. 354. Keidanren’s comments on various proposed legal reforms are available in English on their website at https://www.keidanren.or.jp/en/policy/index03.html. Accessed 30 April 2015.
- 39.
Tokyo Stock Exchange, TSE-Listed Companies White Paper on Corporate Governance 2013, p. 26.
- 40.
Passed by the Diet in 2014 but not yet having come into force at the time of writing.
- 41.
- 42.
On the background surrounding the introduction of the SPA Act see Hama (2008).
- 43.
Shoutengai Jitai Chousa Houkokusho (Report on the Survey of the Condition of Shoutengai) (Small and Medium Enterprises Agency, 2010), p. 9. The majority of shoutengai, roughly three quarters, remain as unincorporated associations, while a smaller number are organized as business cooperatives.
- 44.
Article 6 of the SPA Act sets out the rules delineating the district of an SPA. It must be an area in a city or ward of a city in which 30 or more retail or service providers operate in close proximity to one another.
- 45.
Article 20 of the SPA Act requires members to make an equity contribution on joining, while Article 22 allows the SPA to impose levies for expenses on members and Article 23 allows the imposition of usage fees.
- 46.
When the Osaka Nipponbashi Suji Shoutengai replaced its arcade roof, more than 90 % of the 1.26 billion Yen cost of the project came from city, prefectural and central government sources while only about 8 % was covered by the SPA itself. Yamada et al. (2012), p. 309.
- 47.
On the regulatory changes which occurred in that period, see generally Upham (2001).
- 48.
With the introduction of the Department Store Act no. 76 of 14 August 1937. See Grier (2001), p. 4.
- 49.
Discussed in Itoh (2000).
- 50.
This was the number one problem cited by shoutengai in Shoutengai Jitai Chousa Houkokusho (Report on the Survey of the Condition of Shoutengai) (Small and Medium Enterprises Agency, 2010).
- 51.
On these, see McGinty (2015 forthcoming).
- 52.
McGinty (2015 forthcoming).
- 53.
A survey of shoutengai by the Tokyo government indicates such policies are among the main reasons certain businesses operating on shoutengai refrain from joining their SPA. Tokyo To Shoutengai Jitai Chosa Hôkokusho (Report on the Survey of the Condition of Shoutengai in Tokyo) Tokyo City Department of Industry and Labor (2010), p. 37.
- 54.
Shoutengai Jitai Chousa Houkokusho (Report on the Survey of the Condition of Shoutengai) (Small and Medium Enterprises Agency, 2010) notes that the lack of successors to existing business is cited as the top concern by far of shoutengai.
- 55.
On BIDs, see generally Briffault (1999).
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McGinty, S. (2016). From the Boardroom to the Corner Store: Globalization, Law and Economic Organization. In: Fenwick, M., Wrbka, S. (eds) Flexibility in Modern Business Law. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55787-6_4
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