U.S. Shareholder Activism: Convergence with Japan

To many observers long accustomed to slow, incremental change, the current boom in shareholder activism in Japan comes as a surprise. The opening for U.S.-style activists was created by market conditions that eventually resulted in policy changes that attracted significant numbers of foreign investors. How¬ever, even the current market would not have emerged without a parallel evolution in U.S. hedgefund tactics, which gradually shifted over a number of years to a sophisticated and more nuanced approach, one based on partnership and dialogue with target companies, in contrast to adversarial relationships and public campaigns. This article attempts to place current trends in Japan, which has seen a dramatic increase in shareholder engagement with target companies, in the context of the long history of U.S. shareholder activism. It describes how strategies in the U.S. have evolved over time to converge with the current state of the market in Japan, making Japanese companies more receptive to the current style of U.S. activist engagement. The dramatic increase in activism in the Japanese market over the past several years is arguably attributable to this convergence of multiple changes on either side that has culminated in an alignment between long historical preparation in the U.S. and opportunity, created by necessity, in Japan.