´´ A letter to Mr. Market and corporate Japan

Tuesday, December 11, 2012

A letter to Mr. Market and corporate Japan

Lately, I have been pounding quite a bit on japanese management teams regarding their attitude towards shareholders (the owners of the company) and their negligence of the prevailing phenomenon of stocks selling well below intrinsic value and/ or even below liquidation value for a prolonged period of time.

As far as I can see it (and I am far from being all-knowing), questioning japanese management on those matters is valid and legitimate. But it is not the whole story and it would be unfair and short- sighted solely blaming the management for the malaise shareholders in Japan (japanese and foreign) finding themselve.

Actually,  many japanese managers have done a good or even an extraordinarily good job on an operational level ( (you too Ryoyo :)), given the extremely adverse business and economic conditions they have been facing. I even regard japanese management skills and integrity in aggregate as superior to those of anglo- saxon and european managers.

So japanese management counter-argument to my claim, that corporate Japan should be more assertive towards the stock-price, could be as follows:

"Look dear shareholder, we have done our utmost to steer the company  through a heavy sea. We have managed to avoid heavy losses, albeit sales have plummeted and/ or input costs have risen substantially. We avoided drainage of valuable assets, maintained shareholder equity and surplus unimpaired and, thus, on an operational level served you best we could. We are not to blaim for the awkward situation you are facing, e.g. that corporate Japan is rich and our stockholders (the majority japanese!!!) are poor. You have to blaim Mr. Market"

It is hard to refute this argument entirely, as to a certain extent it is valid.

Mr. Market in Japan is not manic depressive he is comatose. The entire stock market in Japan has broken down and is not working anymore, not even rudimentarily. Actually, it would not make any difference (at least for me) if the japanese stock market was open or closed tomorrow. For a protracted period of time now, it seems impossible for the market to arrive at stock quotes that would, at least marginally, reflect the fundamental underlying of the business.

But Mr. Market is not an abstract body. It is you and me, the pension funds, the state, etc. And on an aggregate basis one has to admit: we, the market, have done a poor job in Japan. But also you corporate Japan, you too are part of the market. And you neither did a great job in this respect. You are making it yourself to easy by claming we did our best on an operational level, it is just the market who is not honoring it.

Acutally, not only are you a very important part of the market but you are holding the key to success or demise of corporate japan and, more importantly, to the future of the great japanese nation as a whole.

Corporate Japan and bureaucrats of Japan. You are on the brink of overdoing the right thing, e.g the adjustment in the structure of business and the economy in Japan, which was painful but neccessary. You have accomplished!!! Do not burden anymore on the great people of Japan. The people of Japan have done their utmost to get Japan back on track to old marvel and can not stand anymore austerity. You are about to risk the biggest strength Japan has got over the rest of the world. Namely, the extraordinary social cohesion and resilents of the japanese people.

Corporate Japan, you have got the true economic resources, and not the Bank of Japan, to jump- start the japanese economy. To breath new live into the japanese market and japanese society. I promise you that, if you take decisive action, we (the rest of the market) will follow you. With it will come new optimism to the japanese people. People and businesses will regain faith and trust in this marvellous country and also in its institutions. But do it now and do it properly. Windows of opportunity close faster than one thinks. 

1 comment:

  1. Otone,

    Imagine you had a $100M fund, or even a $1B fund (all cash, just formed). Why couldn't you go activist on these companies and stir things up with some disciplined controlled-liquidations and strategic M&A of the remaining assets?