Keiretsu (系列 - the kanji literally means series or related sequence) is a Japanese term for a set of companies with interlocking business relationships and shareholdings. In Japanese the term means also a company that has many branches.
The "Big Six" (6大企業集団) keiretsu, which formed principally from the old Yasuda zaibatsu), are the following:
- Mitsui Group
- Mitsubishi Group
- Sumitomo Group
- Yasuda Group
- Sanwa Bank Group
- Dai-Ichi Kangyo Bank Group
The Toyota Group is considered by some to fit the keirestsu model.
The keiretsu were established after World War II, following the American occupation authorities' dissolution of the family-owned conglomerates known as zaibatsu in 1946. The Americans believed that they could hasten the spread of democracy in Japan by reducing the concentration of wealth and hence economic power. Shares of companies owned by the zaibatsu were distributed to employees and local residents, with the result that in 1949 when the stock market reopened, 70% of all listed shares were held by individuals.
The zaibatsu dissolution was done in a haphazard manner, however. Often a single factory that merely assembled products for its group found itself an independent company, lacking a finance department, marketing department or even procurement department. To deal with this precarious situation, companies within the former zaibatsu banded together through a system of cross-shareholding, whereby each company owned shares in all other group members. Within this structure, the major shareholders tended to be a bank, a general trading company, and a life insurance company. The "Big Six" keiretsu are all led by their respective banks, which are the largest in Japan.
Because listed companies bought and held onto shares in other listed companies, the ratio of shares owned by individuals in Japan has steadily declined to around 20% by 2003. There has also never been a hostile takeover of a listed Japanese company simply because its shareholders refuse to sell at any price. This has made management rather complacent, and greatly reduced shareholder rights. Annual shareholders meetings in Japan tend to be held on the exact same day, and usually end quickly without any questions.
In the 1990s, when the Japanese stock market showed a relentless decline, stable shareholding began to decline. Banks needed to sell their shareholdings in order to cover their credit costs. Life insurers had to sell to pay their policyholders. Even corporations are selling shares because the original rationale for holding them has disappeared.
The term "keiretsu" is rarely used in referring to Western companies. One notable exception is the venture capital firm of Kleiner, Perkins, Caufield & Byers, which encourages transactions among companies in which it holds a stake.
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