"Investor Capitalism: How Money Managers Are Changing The Face Of Corporate America" , by Michael Useem i
Since few people write book reviews in English on Rakuten Blog, I write book reviews in English as well.At Toshiba's general shareholders meeting on June 25, 2021, the company rejected Toshiba's proposal to reappoint Osamu Nagayama as chairman of its board of directors. It has been reported that there have been growing opposition from activist shareholders to the management of the 2020 general meeting of shareholders."Toshiba's largest shareholder Effissimo demands stronger governance" KYODO NEWS - Jun 18, 2021 Japanese media were surprised by the news and reported that it was an unusual shareholders meeting.Dr. Hiroshi Okumura called this heterogeneous corporate ownership structure "corporate capitalism." in japan.Most of the shareholders of Japanese companies are their affiliates, group companies, financial companies of conglomerates with which they do business, and business companies with which they do business. This means that corporatization of equity ownership is mainstream.This is why, until recently, the managers of famous listed companies in Japan, where most of their stock ownership is controlled by the corporations of their friends, were opposed to proposals at general shareholders meetings and were not cancelled.This time, they opposed Toshiba's proposal to monitor the management of their portfolio companies and seek to increase corporate value in order to protect investors' interests.This is nothing new. They only exercised the rights of stockholders, but this has rarely happened so far, and Japanese newspapers have been writing articles that incite fear of overseas stockholders.The news made Stewardship Code famous.But , MICHAEL USSM, a professor at the Wharton School of the University of Pennsylvania, originally argued in 1999 for ”Investor Capitalism”.In this book he argued in 1999:”General Motors and IBM dismissed their chief executives and laid off thousands of employees. Sears cut staff, closed its catalog, and auctioned off divisions. American Airlines, Bell Atlantic, and Digital Equipment reengineered their operations. Chase and Chemical Banks merged, while ITT and AT&T divided themselves.Taken in isolation, each company action may appear to be the product of unique circumstances, but behind each merger, each breakup, each shake-up, is the growing power of investors. And the investors wielding this power are not the plutocrats of old but the managers of pension funds, bank trusts, insurance contracts, charity endowments, mutual funds, and 401(k) plans. Pooling the money of millions of small investors, these managers have built massive stakes in the nation's enterprises, and in recent years they have begun to flex their muscles in reshaping corporate direction and improving company performance.The old rules of investing used to be simple and clear: you bought shares and left the operation of the company to a group of professional managers; if you where unhappy with the firm's performance, you sold your shares and moved on. But with the rise of large institutional investors, the option of selling has become problematic. It's one thing to cash out when you own a hundred shares of a company; it's another thing entirely when you own a hundred thousand shares.So fund managers have adopted a new strategy—changing the corporation's policies from within—with dramatic results. Investor Capitalism documents the ensuing struggles among interested parties that have transformed the way in which business goes about its business. Michael Useem takes us inside the boardrooms and into the proxy battles to track the origins of this shift in corporate power and analyze what it has meant for corporations, shareholders, employees, and the American economy. His insights reveal a brave new world of business, which we ignore at our peril.”Especially for investment trusts, Vanguard's S & P 500 Index Fund keeps investment costs as low as possible and returns high performance profits to investors. Their strategy is to avoid the massive stock sell-off problem pointed out by Professor MICHAEL USSM and to hold stocks for a long period of time, and to make the compounding system work by monitoring the management of the invested companies and reinvesting the dividends they have earned, which has been a great success.I believe that the actions of these overseas shareholders that took place today at Toshiba's General Meeting of Shareholders will have a ripple effect on other famous Japanese companies as well as famous companies around the world.After Investor capitalism, I think the world of pension fund socialism, Peter Drucker's book ”The Pension Fund Revolution”, is approaching.Period.