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On Monday, the chairman of Toshiba Corp. (6502.T) rejected investor calls to resign, saying he wanted to help correct the crisis-hit Japanese conglomerate and would bring in new directors.
Toshiba came under heavy scrutiny after an independent investigation revealed last week that management colluded with Japan’s powerful Ministry of Commerce to prevent foreign investors from gaining influence on the board, in what one major shareholder called the world’s worst corporate scandal in a decade.
In response to the investigation, the once-weekend group said it would not put two directors up for re-election and that two other CEOs would also be resigning.
Those changes were not enough for the institutional advisory firm ISS, which reiterated on Monday that Chairman Osamu Nagayama should step down – a call echoed by other investors.
At a press conference, Nagayama apologized and said there were gaps in governance, but the former pharmaceutical executive said he wanted to stay and help rebuild management at Toshiba.
He said the company needed managers with a “global perspective” and background to run similar companies, adding that Toshiba would call an extraordinary general meeting and speed up plans for a strategic review.
Toshiba said on Sunday that the Chairman of the Audit Committee, Junji Ota, and another member of the committee, Takashi Yamauchi, will be retiring as directors. The audit committee was criticized by investors for failing to take action even after its members learned of collusion against shareholders.
The two other company directors who are leaving are alleged to have reached out to the Ministry of Economy, Trade and Industry (METI) for support in Toshiba’s battle against foreign shareholders over board nominees ahead of last July’s annual general meeting, according to the investigators’ report.
Despite being scandalized often, Toshiba, a manufacturer of nuclear reactors and defense equipment, remains of great interest to the Japanese government. Japan’s trade minister denied on Friday that his officials had instructed an advisor to rely on Toshiba’s foreign shareholders. Read more
The Blame Game
The Toshiba Corp. logo appears at the company’s facility in Kawasaki, Japan on June 10, 2021. REUTERS/Kim Kyung-Hoon
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The shareholder investigation marked an explosive turning point in a long battle between company management and foreign shareholders, and renewed concerns about governance in the world’s third-largest economy and its openness to foreign investors.
Toshiba’s second largest shareholder, 3D Investment Partners – one of the investors the investigators report said were targeted by METI – also called on Sunday for the resignations of Nagayama, Ota and Yamauchi as well as another member of the audit committee, Nobuyuki Kobayashi.
Nagayama blamed Toshiba’s former CEO, Nobuaki Kurumatani, for helping push the company into a crisis.
“There was a somewhat confrontational attitude towards shareholders who have been brewing for some time,” Nagayama said when asked about the responsibility of the former CEO.
“This is a fundamental reason on the one hand for the current state of things.”
Nagayama said Monday that some of the information detailed in the investigators’ report was previously mentioned in a previous internal report by Toshiba — an admission that angered some investors.
An investor in Toshiba who declined to be held responsible for governance failures in oversight of management said, “It seems hollow that Chairman Nagayama is trying … to shift the blame to Kurumatani alone. If anyone should resign to take responsibility for governance failures in oversight of management, it should be he is”. Determined due to the sensitivity of the matter.
Since lobbying by activist shareholders this year for greater accountability, Toshiba has faced and rejected a $20 billion bid from CVC Capital. But major shareholders demanded that she explicitly seek offers from potential suitors.
Nagayama said the company has not received offers from private equity funds since the CVC but that the planned Strategic Review Committee will consider various options, including taking Toshiba private.
He added that he wanted to include two of the company’s foreign directors in the four- or five-member committee. Toshiba currently has four foreign directors among the 11 members of its board of directors.
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