Shareholders Sack Toshiba Chairman of Board in Major Governance Win in Japan

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TOKYO, June 25 (Reuters) – Shareholders of Toshiba Corp (6502.T) on Friday dismissed its chairman of the board and another director, issuing a seismic rebuke to the company after it was discovered that it had come to an agreement with the government to suppress the interests of foreign investors.

For many, the annual general meeting result marks a new turning point for corporate governance in Japan after activist Toshiba shareholders prevailed earlier this year by securing an investigation into allegations of pressure on investors foreigners.

Evictions of board members from Japanese companies, especially names known as Toshiba, are extremely rare.

“This result signals a paradigm shift in Japan and will only embolden activist investors, both foreign and domestic,” said Justin Tang, head of Asian research at United First Partners in Singapore.

But supporters of former board chairman Osamu Nagayama say his failure to be re-elected will only set Toshiba back, robbing the industrial conglomerate, which has gone from crisis to crisis since an accounting scandal in 2015, of a experienced leadership.

CEO Satoshi Tsunakawa took over the helm in April after the controversial former company executive left, but said he didn’t plan to stay too long.

The breakdown of the votes was not immediately disclosed. Newly elected directors met on Friday to discuss who will lead the new board.

According to a Toshiba source, foreign investors voted in greater numbers than at previous company shareholders’ meetings because they saw it as an important test of corporate governance in Japan. The source was not allowed to speak to the media and declined to be identified.

It remains to be seen how the government reacts to the results of the AGM.

Toshiba, which manufactures defense equipment and nuclear reactors, is strategically important to the government and Commerce Minister Hiroshi Kajiyama did not apologize for his ministry’s dealings with the company, saying the policies put in place. work were natural to the ministry.

“In general, the hope is that corporate governance can be improved through discussions with shareholders and at the same time, we are working to ensure the stable development of companies and technologies that are important from the point of view of the company. national security, ”he said at a regular press conference ahead of the AGM.

Toshiba Corp. Board Chairman Osamu Nagayama attends a press conference in Tokyo, Japan on June 14, 2021, in this photo taken and released by Toshiba Corporation. Toshiba Corporation / Document via REUTERS / File Photo

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On Thursday, Akira Amari, former economy minister and influential lawmaker for the ruling Liberal Democratic Party, accused activist investors of focusing only on short-term profits and called for better oversight of those investors to protect the economic security. Read more

SHAREHOLDER REVOLT

Toshiba shares closed 0.6% lower. The stock is up about two-thirds in value this year, supported by a $ 20 billion bid on the company by private equity firm CVC Capital. Although Toshiba rejected this offer, it promised a strategic review.

Nagayama’s ouster could help activist shareholders push the company to consider takeover bids. Since the CVC offer, event hedge funds have been actively buying Toshiba shares, making the shareholder list potentially more favorable for activists, investor sources said.

Nagayama didn’t join Toshiba’s board until mid-2020 after alleged pressure from foreign shareholders to vote in line with board candidates.

Former CEO of Chugai Pharmaceutical (4519.T) and director of the board of directors of Sony Group Corp (6758.T), he is well respected and electronics giant and former US Ambassador to Japan John Roos have told him expressed their support.

But his critics have argued that he should resign to take responsibility for the board’s resistance to responding to the allegations.

Shareholder advisory firms Institutional Shareholder Services Inc and Glass Lewis had recommended shareholders not to renew it, while 3D Investment Partners, Toshiba’s No.2 shareholder based in Singapore with a 7.2% stake, had called for his resignation.

3D Investment said in a statement after the result that it hopes the AGM marks the start of a new era at Toshiba and looks forward to a constructive and ongoing dialogue with the board and the team. of Toshiba’s leadership.

Toshiba appointed 11 directors to the AGM, including Nagayama. Nobuyuki Kobayashi, member of the audit committee, was also excluded.

New directors are expected to be recruited, but it was not immediately clear when Toshiba was considering appointing them or holding an extraordinary general meeting to vote on their appointments.

Reporting by Makiko Yamazaki; Writing by Tim Kelly; Editing by Edwina Gibbs

Our Standards: Thomson Reuters Trust Principles.

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