Toshiba shareholders Japan Inc. removed the chairman for

TOKYO: Shareholders of Toshiba Corp ousted the chairman of the board on Friday, in a powerful rebuke to the company after finding that management colluded with the Japanese government to pressure foreign investors.

The unexpected removal of chairman Osamu Nagayama, a veteran of Corporate Japan, and another director marked a clear victory for corporate governance, and also increased the ability of foreign investors to push through changes in one of Japan Inc.’s most storied conglomerates. sent a strong signal about. .

The board said it will conduct a thorough review of assets and prepare a growth plan through dividend and purchase of shares. It will also engage with potential investors, it said, comments that could lead to tensions with the government, which regards Toshiba as a strategic asset.

CEO Satoshi Tsunakawa was appointed as interim chairman, the company said, adding that it recognized the seriousness of the disapproval of the two directors.

“This result marks a paradigm shift in Japan and will only encourage active investors whether overseas or domestic,” said Justin Tang, head of Asian research at United First Partners in Singapore.

Tsunakawa took over again in April after Toshiba’s previous CEO left, but said he did not plan to stay for very long. Removal of board members in Japanese companies, especially household names such as Toshiba, is extremely rare.

But supporters of Nagayama say his failure to win re-election will set Toshiba further behind, depriving the industrial conglomerate, which has gone from crisis to crisis since an accounting scandal in 2015 under a veteran leadership .

The breakdown of the vote was not immediately disclosed.

The strategic review will be led by Paul Brough, a chartered accountant with experience in mergers and acquisitions as a financial advisor.

A Toshiba source, who was not authorized to speak to the media, said foreign investors had voted in higher numbers than at previous shareholder meetings because they saw it as an important test case of corporate governance in Japan. was.

Government’s response

How the government responds remains to be seen, but so far Trade Minister Hiroshi Kajiyama has not expressed regret about his ministry’s dealings with Toshiba, saying that the policies that were implemented were not It was natural for the ministry.

Toshiba manufactures defense equipment and nuclear reactors and is strategically important to the government.

“The general expectation is that corporate governance can be improved through discussions with shareholders as we work to secure the steady growth of businesses and technology that are important from a national security perspective,” he said at a regular news conference. AGM.

On Thursday, Akira Amari, a former economy minister and an influential lawmaker in the ruling Liberal Democratic Party, accused active investors of focusing only on short-term profits and called for better monitoring of such investors to protect economic security.

shareholder rebellion

Shares of Toshiba closed down 0.6 percent. The stock has risen nearly two-thirds this year, strengthened by a $20 billion bid for the company by private equity company CVC Capital. Although Toshiba has rejected that bid, it has promised a strategic review.

Nagayama’s ouster may help spur active shareholders to consider the company a take-private offer. Since CVC’s bid, event-driven hedge funds have been actively buying shares of Toshiba, making the shareholder roster potentially more favorable to activists, investor sources have said.

Nagayama, who has been cautious about such proposals, joined Toshiba’s board in mid-2020 after perceived pressure from foreign shareholders to vote in line with management’s board candidates.

A former CEO of Chugai Pharmaceutical and a director on the Sony Group Corp board, he is well respected and John Ross, both the electronics giant and former US ambassador to Japan, expressed his support for him.

But his critics argued that he should step down to take responsibility for the board’s resistance to the charges. Read also: PAN-Aadhaar linking deadline extended again by 3 months, see last date here

Shareholder advisory firms Institutional Shareholder Services Inc and Glass Lewis recommended shareholders not to reappoint him, while 3D Investment Partners, the Singapore-based No. 2 shareholder of Toshiba with a 7.2% stake, called for his resignation.
3D Investments said in a statement after the results that it expects the AGM to mark the beginning of a new era and looks forward to constructive, ongoing dialogue with Toshiba’s board and management team.

Toshiba nominates 11 directors, including Nagayama, at the AGM. Nobuyuki Kobayashi, a member of the audit committee, was also voted out. Read also: Income tax deadline extended by 2 months under Vivad se Vishwas scheme

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