TOKYO — A revolt by foreign shareholders at Toshiba Corp.
Friday’s shake-up at shareholders’ meeting ended six years of unrest that began with an accounting scandal and led to foreign shareholders owning a majority of the industrial conglomerate. After years of struggling against Toshiba’s management and Japanese directors rooted in the country’s corporate culture, these foreign shareholders now have the upper hand.
Friday’s upheaval removed Toshiba chairman of the board, Osamu Nagayama, and placed former KPMG Hong Kong partner Paul Brough in charge of a powerful new strategic review committee on the board of directors. ‘administration. Singapore-based financier G. Raymond Zage III will head the nominating committee while Jerry Black, a US retail veteran, will head the compensation committee.
The new board of directors marked its openness to offers from global investors for parts of Toshiba or the entire company. “We think it’s important to engage with this investor base to understand what alternatives might be available to our shareholders,” he said in a statement.
The ousted president, Mr Nagayama, rejected an offer from CVC Capital Partners in April, saying it was not detailed enough.
The new board also said it will focus on increasing shareholder returns through buybacks and dividends and hire a global executive search firm to seek a successor to chief executive Satoshi Tsunakawa, who will assume the role of Interim Chairman of the Board. The leaders of Toshiba so far have always been Japanese.
As recently as this year, Toshiba’s board of directors was made up of veterans of the Japanese company and appeared to be in control. The audit committee, chaired by a former executive of Nippon Steel Corp., examined allegations of undue pressure on foreign shareholders ahead of last year’s annual meeting, and the review is concluded in February without problem. A shareholder meeting was scheduled for March during which management hoped to put an end to complaints from activists.
Instead, that meeting resulted in a vote ordering a new investigation, which in turn revealed evidence of broad collaboration between Toshiba executives and officials from the Ministry of Economy, Trade and Finance. ‘Industry to stifle the voice of foreign shareholders. An executive wrote an email saying the group’s way of dealing with these shareholders was to “beat them up,” investigators found.
Mr Nagayama, who said he was unaware of the activity, tried to save his job by ousting executives and directors named in the report, but it was too late. After Friday’s vote, he and the entire audit committee that was in place in February left.
Toshiba individual shareholder Kenkichi Abe said after Friday’s meeting that he voted against management’s recommendations. “I felt doubts and mistrust of the way they conduct backstage maneuvers in hidden rooms,” he said.
While it’s not common for foreign shareholders to own a majority of large Japanese companies, Toshiba’s vote is likely to embolden other investors who have pushed for shareholder-friendly changes.
Mr. Ichikawa of Sumitomo Mitsui DS Asset Management said young investors in Japan are more likely to listen to activists’ opinions. In addition, pressure from the Tokyo Stock Exchange to reduce cross-shareholdings in which large Japanese companies hold stakes in each other would make it easier for foreign shareholders to advocate for their case, he said.
NLI Research Institute strategist Shingo Ide said foreign directors would be helpful in corporate overhaul. “They have no constraints within the company or with customers, so they can think theoretically without being swayed by emotion,” he said. “They have different ways of thinking from the Japanese. “
Nonetheless, Toshiba’s foreign-dominated board of directors will face challenges in streamlining the conglomerate, whose roots date back to 1875. The company has suffered from a long series of accounting scandals, internal feuds and bankruptcy. bad business decisions. One of those decisions ended with the 2017 bankruptcy of Toshiba’s US nuclear unit, Westinghouse Electric Co. The company sold out most of the mainstream businesses, such as laptops, which once made it a name. known.
Among Toshiba’s main investors who pushed for the change were Effissimo Capital Management Pte., A Singapore-based fund managed by Japanese investors; Farallon Capital Management LLC, a San Francisco-based hedge fund known to have been founded by former Democratic presidential candidate Tom Steyer; and 3D Investment Partners Pte, based in Singapore.
In a statement, 3D welcomed the new board of directors and said it hopes the reshuffle “marks the start of a new era at Toshiba.” Effissimo did not immediately respond to a request for comment.
Some foreign shareholders believe that the best way to maximize Toshiba’s value is to have the company tendered by private equity firms. These companies would likely seek to sever parts of the conglomerate, which manufactures elevators, semiconductors, nuclear power plants and sewage systems, among other things.
“Unless the company actively discusses the delisting with potential buyers, it is impossible for them to make a credible and realistic offer,” Eijiro Imai, general manager of Tokyo-based Farallon, told a conference telephone in May.
The new board declined to go so far as to hang a “for sale” sign on Toshiba, but said the strategy committee would broaden its scope and “undertake a full review of the company’s current assets.”
—Chieko Tsuneoka contributed to this article.
Write to Megumi Fujikawa à [email protected] and Peter Landers at [email protected]
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