The Concept of Corporate Value

Corporate Governance, Shareholder Interests, and Stakeholder Interests in Japan

Abstract

“Corporate value” (kigyō kachi) is a key concept in the soft law associated with Japanese corporate law. This paper delves into the term’s meaning and the reasons behind its usage in Japan.

Corporate value is ambiguous and flexible, an assessment that is true whether the term means shareholder interests or whether it connotes stakeholder interests. Soft law integrates stakeholder and shareholder interests into corporate value and posits the latter as the ultimate policy goal. Stakeholder interests are deemed legitimate policy goals if they contribute to corporate value. This approach allows policymakers to consider stakeholder interests and, at the same time, to commit to endorsing shareholder interests.

Further, with the revised definition of corporate value that avoids any contradiction of shareholder interests and with the cautions against any abuse of the concept, as articulated in the series of guidelines on hostile takeovers, we see a gradual endorsement of shareholder interests as a policy goal. A hostile takeover is a situation where protecting shareholder interests becomes pivotal. Thus, in order to show that policymakers endorse shareholder interests, it was necessary to reduce the room for any abuse of the corporate value concept.

Although the way soft law uses corporate value can generally be supported, whether we should always integrate stakeholder interests into corporate value can be questioned, particularly when stakeholder interests are pivotal, as this approach creates incentives for making skewed policy discussions.