Reference no: EM133093241
Idemitsu Profile of the company
Idemitsu Kosan Co., Ltd. is a Japanese company which refines crude oil and distributes oil products. It was founded by Sazo Idemitsu in 1911 in Moji-City (Kitakyushu-City presently) as a retailer of oil products. Idemitsu was approved as a major oil producer by the Ministry of Economy and Industry in 1947 soon after the end of the 2nd World War. The company developed largely during Japan's rapid growth period. Idemitsu was not on the stock market till 2006. It was famous for an unlisted gigantic company till then. The founding family has kept 33.9% of the stocks since it was listed on the Tokyo Stock Exchange Market.
The basic information of the company is as follows:
Capital: US$1.5billion
Employees: 9,846
Sales of 2016: US$35.7billion
Merger Plan
The founding family of Idemitsu Co., Ltd. gave a strong objection to the merger plan between Showa Shell Oil and Idemitsu. The plan took the initiative in a series of mergers in the oil production industry. However, its realization has become uncertain. There have been several cases recently that the founding families of family businesses were involved in crucial decision-makings. These cases have drawn attention to governance systems in family Business.
Different Corporate Culture
The attorney of the founding family made an announcement on June 26, 2016 saying that the main reason for their objection against the merger plan was the two companies had completely different corporate cultures. The family clearly expressed their confrontational attitude toward management.
The lawyer said that the total number of stocks possessed by the founding family accounts for 33.92%.
The founding family voted against the re-appointment of 10 board members supporting the merger plan at the stock-holders' meeting on June 28. The re-appointment was finally approved despite the opposition from the family, according to the company. It does not mean necessarily, however, that the merger plan will be going forward.
The merger plan needs a special resolution at more than two thirds of the stockholders at the stock-holders' meetings of the two companies in order to proceed with the plan. The founding family of Idemitsu has more than a third of the stocks. If the family uses its veto power against the plan, the merger will disappear.
This merger scheme triggered the merger negotiation between JX Holding and Tonen General Oil. It shook the oil production industry so strongly, which has been suffering from a sluggish domestic demand and excessive production facility and equipment. However, the future of the merger is in a thick fog.
Question 1: Why did the management of Idemitsu have to consider merging with another company as an industrial structure issue?
Question 2: If the management and the family fiercely oppose to each other, about a critical issue, how would you manage the conflict between them? Please consider it by taking into consideration possible options and their solutions.
Question 3: Originally, why is governance important? Assess this case from the viewpoint of the original sense of governance.