Table Speech

Initiation Speech

April 11, 2007

Mr. Teruyuki Ohuchi,
Mr. Shohei Kondo

“Globalization and Business Law Framework of Our Country
(Especially concerning hostile take overs) ”

Mr. Teruyuki Ohuchi,
Attorney at Law,
Yuasa and Hara

1. Japanese business law has changed greatly in recent years, especially laws concerning mergers and acquisitions (M&As). While the world moves towards globalization, M&A is an effective and indispensable tool. But take overs, especially hostile take overs, has powerful effects on those involved, and may cause harm unless a proper law framework is provided. In Japan, work to form such a framework is progressing but the situation has not been fully resolved yet. Recently it is reported that Liberal Democratic Party is reviewing the M&A law, but a clear direction has yet to be shown.

2. I would like to review the history of laws concerning M&As in the United States. In the 1980s, in order to counter the unorderly hostile M&As, the so called “Poison Pill” was introduced. Many companies in Japan have already introducing this counter measure.

There are also changes in US state laws, which is worth attention as most litigations are taken up at state courts in the United States.

As a counter measure, most States tried to reinforce the public offering system regarding securities, but Federal courts ruled the changes as unconstitutional.

Therefore States tried to solve the problem by amending company acts which are under the jurisdiction of the States. Consequently, several laws, such as laws forbidding green mail were passed but I wish to point out Constituencies Statutes (Laws regarding the local supporters of corporations). In this legal principle, the business judgment of the directors, should not only take the interest of the shareholder, but also the interests of a wide range of the stakeholders, such as employees, customers, and local society (federal economy, in some States). As an example of such rule, the company act of State of Pennsylvania, Section 1716 states clearly "If the board of directors considers the influence of a wide range of stakeholders, this is not contrary to the duty of the board of directors which is to protect the best interest of the corporation.” More than half of the 50 states have such a law and the number reaches to two thirds depending upon the classification.

3. Let’s look at the situation in Japan. In the court ruling on the measures of protection by issuing new shares, “Legal principle of dividing the authority of organization” is the basis. Namely selection of the member of the board of directors is the authority given to the shareholders who are the owner of the company, therefore conversely influencing the composition of the shareholders by the directors is limited. This principle is not covered by the wordings of the law but by the principle of the company act as a whole.

Therefore judgment of whether an issue of new shares is proper or not is depends upon whether such new issue is for the investment of new equipment which is a proper action for the management, or is it to simply influence the composition of the shareholders. ( so called main purpose rule)

4. Comparing the regulations of Japan and the United States, though both place the interest of the shareholder as the basis, there is a difference in the level of recognizing the interests of the stakeholders. Recently the corporations are often called as public enterprises. This means The management of the company is assigned by the shareholders. The Company has the responsibility to provide goods and services necessary for the society.( similar to the vocational service of Rotary) To provide place to work and make a living. As public enterprise, it is natural to consider the interest of supporters of the company. Though it is important to provide a high return on investments of financial assets totaling 2,000 trillion yen circulating in the world, that should not be the only purpose of the companies.

5. If I compare my experience at the University of Michigan in 1954(Eisenhower period) and my experience at Harvard Business School in 1993 (Reagan period), the trend of stressing profitability of the corporations and the trend of stressing social responsibility of the corporations appeared alternatively like making a twist of the rope. When I look at the present political situation of the United States, I feel a swing back from a large wave. Public opinion regarding the social and environmental safety is very strong. The fact that written regulations of the United States are recognizing the social responsibilities of the corporations feels awkward to the basic principles of capitalism in the United States. In fact, Japan should make regulation concerning such matters.

To conclude, in order to introduce globalization successfully Japan, I believe it is necessary to make reforms that match the local situation and capability.

“Santa Clause is an incarnation
of my mother”

Mr. Shohei Kondo,
Chairman of the Board,
Xmas Land Co., Ltd.

My family had a business of production and sales of Japanese cakes. My father died all of a sudden when I was a second grade student of high school.

Fortunately the business continued by the hard work of the employees who served from the days of pre-war period. I wanted to continue to study at college but I was the only boy among the six children of the family and I had to succeed the business of my family. Then the manager of our shop passed away. I worried very much and I finally decided to say [If we continue to stay in business, I want to get in the business of western style cakes.] anticipating strong opposition to this proposal telling my mother [lets stop making Japanese cakes.]. But, to my great surprise, my mother said [Hereafter the generation is Shohei’s generation. I will follow you.] I was surprised by her statement. She is really broad minded.

Immediately after this incident, I closed our old traditional shop of 50 years old. I heard much complaints from my relatives and our old customers but I disposed of machineries, equipment, raw material, printed matters and all others within a few days. From that day, our life completely changed but my mother supported me all the way.

Some time later, we moved our headquarters to Roppongi. We developed a western style cake of black motif and sold without having own retail shops. We met the requirement of business companies and souvenir shops of hotels and wedding party places providing original packaging and this business developed successfully. While supplying cookies with pleasant design for Kabuki Theatre, Nippon Keizei Shinbun, Hayama Goyotei, we created and supplied [Booming Business Cakes] [Two Thousand Yen Banknote Cake], [Japanese Sake Cake] and so on. They were taken up by the media and we were busy following this boom. This is a good memory for me.

When I became 50 years old, I thought of an idea that if we could have Santa Clause come to visit us not only on Christmas time, but also throughout the year, that will be very pleasant for the children. I declared to everybody around saying [My father passed away at the age of 54 but if I can live to the age of 60, I wish to start the business of Santa Clause.] It has been five years since I left my business and asked my son to succeed the business on my 60 years old birthday, as I promised.

Santa Clause is most famous in the world and is loved by all the children of he world.

The love of Santa Clause is same as love of mothers. Based upon the love of my mother who trusted me and loved me so much I started [Xmas Land].

Santa Clause can be everywhere. Santa Clause can attend the party at the school same as mothers. In May, Santa can fly with Koinobori. In summer, Santa could go swimming.

Santa can be everywhere, in every season of the year, in very occasion. Children can enjoy Santa Clause everywhere at every occasion.

At present, we are recruiting the 396 members of Reindeer Club to create dreams for the children. Xmas Land is not a Theme Park like Disneyland. It is a small communication park. Smiles of families will be born there.

My mother passed away on April 11, 1987. Today is the 20th anniversary. The day before yesterday was the 50th anniversary of my father’s death. I am very fortunate because I was given a chance to make initiation speech of such memorial days of my parents.