Amidst global competition, financial reform and deregulation, Japan Inc. is on the rebound wave. In the post-war era, for the first time shareholders are experiencing sufficient rights and regulatory freedom. They are finally waking up to demand better corporate governance. In Japan, the liberalized corporate law is more shareholder-friendly than in America or Britain. Unlike in the past, Japanese shareholders can vote directly on dividends and executive pay. They are even empowered to oust the entire board without cause. Against the increased strength in practice, most Japanese investors defer to managers.
"Earlier shareholders' meetings used to be over in less than half an hour. However, companies today are coming under growing pressure from shareholders, encouraged by increasingly vocal investment funds. I hope that Japanese shareholders are going to begin putting more pressure on management."
Like weather, one's fortune may change by the evening said Luu Mengzheng of the Song Dynasty. Ups and downs are not merely part of a roller coaster ride, it occurs in the corporate world too. The only difference is, for a roller coaster rider it thrills when it slides down but for a corporate rider it thrills when the company zooms up.
Companies considered good or excellent, tumble and stabilize at a lower point or even hit the ground. The cause could be the slightest of tremors pertaining to a war in a distant land, or a far reaching decision made by the OPEC. The slightest reasons can send ripples affecting the apparent stability of the company in the stock market, but a downfall?
What are the reasons for a corporate downfall? In general, it is difficult to pinpoint particular reasons. This article however discusses some factors that have lead companies to their downfall.
In their book, In Search of Excellence, Tom Peters and Robert H Waterman Jr, attributed one of the important reasons for some companies being excellent is that they `stick to the knitting', which means simply to `stay with the business that you know'. Of course it may be true in a few cases, but some companies had a downfall after being stuck to the knitting. Polaroid is one example which became a prey to it. Polaroid was doing what it knew well. Its core competence was in `instant film technology'. In 1991, the era of digital camera began but Polaroid entered into this segment very late. It had a major threat from video cameras, which unlike Polaroid did not use films but magnetic tapes. |
