Koito Case Question 2

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2. What were T. Boone Pickens’ motives when he bought the share? As the largest shareholder of Koito Manufacturing, is he entitled to representation on the board, does Japanese law allow for that? If not what in the law could he use to get an equivalent result? What were T. Boone Pickens’ motives when he bought the share? On April 4,1989, Mr. Pickens had bought 32.4 million koito shares(20.2%) from Mr.Watanabe. A year after, on March 30, 1990, he acquired additional 5 million shares of Koito stock, therefore, with the 26.4% koito shares, he has become the largest stockholder of the Koito Manufacturing Company. He claimed that his purchase of Koito's shares was a long-term investment and the purchase is a test case to determine the accessibility of the Tokyo market. He also intended to get operating data and board representation in order to access to the management level and have the right to the dividend allocation. Mr. Pickens bought the stock hoping that Koito would pay him ''greenmail,'' buying the stock back from him at a higher price than is available to other shareholders. As the largest shareholder of Koito Manufacturing, is he entitled to representation on the board, does Japanese law allow for that? No, he is not entitled to representation on the board unless he is approved by the board of the directors. Regarding Mr. Pickens`s request for board representation, Mr. Matsuura told the press, “ We gave no specific answer but explained generally that it is not a custom in Japan to just say, ` I`ve become a major shareholder so I should become a director.`” By a voice vote at 1989 annual meeting, Mr. Pickens was overwhelmingly denied board representation. He cast the only vote in favor of his proposal, later saying that 60% of shareholders who had voted him down were in management`s pocket. As in most other nations, shareholders without direct or

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