Toshiba board chair admits governance issues over gov’t collusion
Written by tokyoclub on June 14, 2021
Toshiba Corp.’s attempts to influence foreign activist investors with government help ahead of a general shareholders’ meeting last year were problematic in terms of governance and compliance, the chairman of the Japanese conglomerate’s board said Monday.
Osamu Nagayama, head of Toshiba’s board, apologized to people concerned, including shareholders, after a probe by lawyers revealed last week that the company sought the industry ministry’s help in blocking proposals by foreign activist investors and the shareholder meeting was not conducted fairly.
Nagayama said in an online briefing that former CEO Nobuaki Kurumatani is responsible for having caused confusion with his “confrontational approach” to investors. Kurumatani chaired the shareholders’ meeting.
Osamu Nagayama, chairman of Toshiba Corp.’s board of directors, speaks during an online press conference on June 14, 2021. (Kyodo)
“I apologize for causing confusion and worry among all stakeholders,” Nagayama said in the online briefing.
“We have to say those people (who were engaged in exchanges with the government) lacked awareness about governance and compliance,” Nagayama said, referring to the findings of the independent probe.
Ahead of the June 25 shareholders’ meeting, Toshiba has been pressed against time to ease tensions with foreign activist shareholders, who have a big say following their investments to help the conglomerate cope with financial struggles.
Launched at the request of foreign shareholders, the independent investigation has found Toshiba sought help from the Ministry of Economy, Trade and Industry in thwarting proposals by foreign activist investors like Singapore-based Effissimo Capital Management Pte. Ltd. at a general shareholders’ meeting in July 2020.
The revelations of collusion between Toshiba and the ministry have raised doubts anew about corporate governance. The Japanese household name has vowed to improve governance since an accounting scandal in 2015.
Kurumatani was Toshiba’s CEO until he stepped down in April amid a management rift over a buyout proposal by British private equity firm CVC Capital Partners.
Kurumatani, who once served as head of CVC’s Japan unit, faced growing pressure from foreign activist investors disgruntled with him. At the July 2020 meeting, he saw shareholder support fall sharply from a year earlier.
“Irrespective of whether he is legally responsible, we cannot ignore Mr. Kurumatani’s responsibility for causing management confusion and undermining shareholder confidence,” Nagayama said.
Following the independent panel’s report, Toshiba said it will look into the root cause with the participation of third parties, clarify responsibilities and take preventive measures.
Nagayama, who himself has also come under criticism, said priority should be to “rebuild” Toshiba’s board.
His remarks came a day after Toshiba in a rare move changed its list of board director nominees pending shareholder approval.
Dropped from the list are Junji Ota, chairman of Toshiba’s audit committee, and member Takashi Yamauchi. The audit committee concluded earlier that there was no problem with the shareholders’ meeting last year.
Two senior executives mentioned in the independent panel’s report — Corporate Senior Executive Vice President Masayasu Toyohara and Corporate Senior Vice President Masaharu Kamo — will retire, Toshiba said Sunday.
The independent investigation panel said Toshiba, in collaboration with the ministry, exerted “undue” influence over the shareholders.
Nagayama said he does not view the relationship between Toshiba and the industry ministry as being problematic, given that it is one of the firms identified as important for national security reasons.
Under Japanese law, the government can keep foreign investors in check if a company in which they invest is considered important on the grounds of national security. Toshiba engages in the defense equipment and infrastructure businesses as well as the decommissioning of the crippled Fukushima nuclear plant.