The season for general shareholders' meetings is just around the corner, and a growing number of companies plan to use them to propose measures against hostile takeovers.

Many corporate managers were apparently frightened into action by the specter of Internet startup Livedoor Co.'s failed but aggressive bid earlier this year to take over radio broadcaster Nippon Broadcasting System Inc. -- perceived by some as a boardroom nightmare.

But overseas investors and others generally have a negative view of the sudden stampede for cover, saying excessive defenses may only serve to protect management at the expense of shareholders.

"In addition to concerns over a possible economic slowdown, the recent selling of Japanese stocks by overseas investors has also been triggered by their negative reaction toward a series of announcements regarding defense measures," said Masatoshi Kikuchi, chief Japan equity strategist at Merrill Lynch Japan Securities Co.

According to Kikuchi, net selling of Japanese stocks, including futures, by foreign investors came to a little more than 1 trillion yen in April and May.

"Overseas investors' interest in this matter is very strong," he said. "I think many will oppose these measures (at shareholders' meetings) out of fear they will hurt shareholders' interests."

There is a wide variety in the types and potency of the tactics announced by firms and viewed by investors and experts as corporate defense measures.

As for the more benign tactics in the works, companies including Fuji Television Network Inc. will lift the upper limit on the number of shares they can issue and reduce the number of board members.

The move, pending shareholders' approval, would increase the number of potential shares that could be allocated to friendly investors and minimize the prospect of aggressors placing numerous people on their boards in a short period.

Other firms plan to introduce poison pill schemes, which include such steps as allocating new shares to existing shareholders in an effort to frustrate unwelcome bidders by diluting their stakes.

Like real pills, their high potency comes with strong side effects. Earlier this month, the Tokyo District Court ruled against a poison pill plan by Nireco Corp., saying it could inflict unforeseeable damage on shareholders.

The court took issue with the fact that the high-tech measuring device maker's board decided to introduce the measure without shareholders' approval.

Nireco's measure was that in the event the firm came under attack from hostile bidders, it would issue new shares to shareholders listed as of March 31.

But the court added that the plan would also hurt these shareholders, since Nireco's attractiveness as an investment would diminish because investors other than the aggressor would be discouraged from buying the shares out of fear such a move would be used.

Seino Transportation Co., Pentax Corp. and eAccess Ltd. also plan to introduce poison pills.

But these differ from Nireco's in that new shares will be allocated to all nonaggressive shareholders at the time the poison pills are used, and the firms will seek approval from shareholders first.

The companies maintain that the poison pills are not meant to bar all potential bidders unwanted by management, because they will not be used under certain conditions.

In Seino's case, bidders who have or intend to acquire a stake of 20 percent or more and want to avoid the poison pill ploy will have to explain their intentions in detail and provide management with enough time to come up with counterproposals so shareholders can compare options.

Seino and others planning to introduce similar schemes stress they will ensure that the measures work for the interest of shareholders as well as the companies.

Toward this end, they will set up a panel of outsiders or independent directors that will either make recommendations or decisions on whether to actually resort to a poison pill.

Many experts said defense measures would have been adopted by Japanese firms even without the Livedoor shock, given the expected legal changes that will make it easier for foreign companies to buy Japanese firms, as well as the decline in the traditional practice of cross-shareholding that has ensured that a significant chunk of a firm's stake remains in friendly hands.

Still, just what constitutes a "hostile" takeover is still a matter of debate, and bidders that are unwelcome from the viewpoint of present management could offer advantageous terms for shareholders.

Some pundits, including Taiji Okusu, head of the coverage division at Credit Suisse First Boston Securities (Japan) Ltd., suspect poison pills may be used to serve the interests of management at shareholders' expense.

"It is too early for Japanese companies to introduce defense measures, given the current state of their corporate governance conditions," he said.

When proper corporate governance is exercised, outside board members act truly independently from management and on behalf of shareholders, he explained.

But he said the fear, especially among overseas investors, that poison pills might be used to even kill bids that are beneficial to shareholders could reduce the attractiveness of Japanese stocks and choke off the money flow to Japan's capital markets.

If Japanese companies wish to fend off uninvited takeover bids, they should instead make efforts to enhance their value with solid corporate governance and business performance, he said.

"It's like the human body; they should focus on daily workouts to enhance their immune system instead of depending on pills," he said. "That will lead to good health in the long term."