Toshiba Corp. apologized to shareholders Monday and said it would remove two directors, after a probe found the Japanese conglomerate had sought government help to try and influence a boardroom vote.
Board chair Osamu Nagayama acknowledged a “lack of awareness on our part, including our dealings with METI,” referring to the Ministry of Economy, Trade and Industry.
But he did not address specific allegations in the independent probe, published Thursday, that said Toshiba had sought METI’s help to prevent activist shareholders from exercising their proposal and voting rights at an annual general meeting in July 2020.
“We apologize to our shareholders and all the other stakeholders in view of their concerns and anxieties that they have expressed with respect to this,” Nagayama said. “The board of directors takes these comments seriously and we will continue to use them to improve management in the future.”
Toshiba was once a symbol of Japan’s advanced technology and economic power, but had lurched from scandals to losses before staging a recovery in recent years.
The industrial group has worked on its financial woes and strengthened its governance, with a board now composed of mostly external directors.
But it has faced pressure from activist shareholders who want to see faster growth and a clearer long-term strategy.
Two board members on the audit committee, Junji Ota and Takashi Yamauchi, will be excluded from standing for re-election at a sharerholders’ meeting this month, Nagayama said.
“It has become difficult to retain the understanding of shareholders for the reappointment of both directors … based on the findings of the recent investigation report.”
An off-schedule general meeting has been proposed to discuss the pair’s replacement, he added.
In a rare statement Sunday, Toshiba said it won’t put forward the names of Ota and Yamauchi for another term. It also won’t reappoint executive officers Masayasu Toyohara and Masaharu Kamo, the company said.
The independent probe showed Toshiba had sought government help in an attempt to influence a key shareholder vote that installed its slate of directors.
The company “devised a plan to effectively prevent shareholders” from exercising their rights at a July 2020 meeting, working with Japan’s trade ministry to counter activist investors, according to the 139-page report released last week and overseen by three lawyers.
“We are taking points made by the lawyers seriously and committed to find out, with help from outsiders, and report what happened promptly with as much transparency as we can,” Toshiba said in its statement Sunday.
Advisory firm Institutional Shareholder Services Inc. recommended a vote against Ota, Yamauchi and three other Toshiba board members following the probe, namely Osamu Nagayama, Nobuyuki Kobayashi and Ayako Hirota Weissman, according to a statement, reiterating the findings of the investigation that showed the July 2020 shareholder meeting “was not fairly managed.”
Toshiba worked in unison with the ministry to exert pressure on 3D Investment Partners, now its third-largest shareholder, which impacted its voting decisions, and to influence how Harvard University’s endowment fund would vote.
Four outside directors at Toshiba — Jerome Thomas Black, Paul Brough, George Raymond Zage and Weissman — put out a separate statement in support of the shift in board nominees.
“These changes, we believe, together with further steps to be taken in future, are an important step in moving towards improved returns to shareholders and enhanced corporate governance,” they said. “We look forward to working with Chairman Nagayama whom we support to lead the board’s efforts to achieve the best possible outcome for stakeholders, including shareholders.”
The findings emerged from a probe proposed by Singapore-based Effissimo Capital Management — Toshiba’s largest shareholder — and approved in March. The standoff between the secretive fund and one of the country’s most storied conglomerates has become a litmus test for Japan Inc. and corporate governance across the world’s No. 3 economy.
At a briefing in Tokyo on Friday, Trade Minister Hiroshi Kajiyama denied that he had asked a former senior adviser, Hiromichi Mizuno, to get involved with Toshiba, although he said Mizuno had given advice on occasion. Kajiyama said the panel’s report didn’t shed definitive light on what happened, but he didn’t rule out the possibility that the ministry would start its own investigation into the findings.
The four external members of Toshiba’s board called the report “deeply disturbing,” and said change was needed in both the board and management.
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