Shareholder group calls for removal of five Toshiba board directors

Institutional Shareholder Services is recommending a vote against five Toshiba board members following an independent probe that showed the company sought government help in an attempt to influence a key shareholder vote that installed its slate of directors.

The advisory firm is recommending a vote against Osamu Nagayama, Junji Ota, Nobuyuki Kobayashi, Takashi Yamauchi and Ayako Hirota Weissman, according to a statement, reiterating the findings of the investigation that showed that the July 2020 shareholder meeting “was not fairly managed”.

The probe involved a shareholder vote which went against nominees put up by Singapore-based Effissimo Capital Management. The Japanese electronics-to-energy conglomerate “devised a plan to effectively prevent shareholders” from exercising their rights, working with Japan’s trade ministry to counter activist investors, according to the 139-page report overseen by three lawyers.

The firm 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.

3D Investment Partners is demanding the resignation of Mr Nagayama and three directors, Reuters reported on Sunday, citing a letter from the shareholder. Reuters didn’t name the three directors.

Toshiba is holding an emergency board meeting on Sunday, according to a person familiar with the matter. Reuters reported that the board will consider reassigning candidates for the company’s audit, nominating and compensation committees following a call for change by major shareholder advisory firms.

The independent probe also details how then-chief executive Nobuaki Kurumatani met with Yoshihide Suga, at the time the chief cabinet secretary and now the prime minister of Japan, ahead of the AGM to explain the situation in person.

On another occasion, senior Toshiba executive Masaharu Kamo met Mr Suga, who the report said expressed support for “aggressive” action to use the Foreign Exchange and Foreign Trade Act, recently enacted legislation designed to protect industries core to national security, according to the report. Mr Suga on Thursday rejected the contents of the report.

“I know nothing of this,” Mr Suga said earlier in the week when asked by reporters in Tokyo about comments attributed to him in the report. “There was no such thing.”

The findings emerged from a probe proposed by Effissimo – 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 and corporate governance across the world’s third-biggest economy.

At a briefing in Tokyo on Friday, Japanese Trade Minister Hiroshi Kajiyama denied that he had asked a former senior adviser, Hiromichi Mizuno, to get involved with Toshiba, although he said Mr Mizuno had given advice on occasion. Mr Kajiyama said the panel’s report didn’t shed definitive light on what happened, but didn’t rule out the possibility that the ministry will start its own investigation into the findings.

Four external board members of Toshiba’s board called the report “deeply disturbing”, and said change was needed in both the board and management.