Toshiba Yokkaichi

Toshiba chairman ousted by shareholders over collusion report

An independent investigation found the company worked with the Japanese government to put pressure on shareholders
Image: Toshiba

25 June 2021

Toshiba chairman Osamu Nagayama has been ousted by shareholders following the publication of a report that found the company colluded with the Japanese government to put pressure on high-profile company investors.

The decision was made at the company’s annual general meeting (AGM) on Friday, the first time shareholders had met since an independent investigation found that the company colluded with Japan’s Ministry of Economy, Trade & Industry (METI) to lay pressure on activist shareholders at last year’s gathering, with the report finding that the meeting was “not fairly managed”.

The document was put together by three independent lawyers who outlined how Toshiba allegedly worked with public officials to influence the result of last year’s AGM, hoping to put pressure on shareholders to approve the company’s board nominees.




The report stated that the company’s action had “an undue influence on shareholders”, even stating that Yoshihide Suga, Japan’s prime minister who was then cabinet secretary, verbally encouraged pressure on investors during a meeting with a Toshiba executive, as reported by Reuters. The probe also found that management worked with the ministry to try and force shareholder Effissimo Capital Management to withdraw its candidate nominations for the board.

Another shareholder, Harvard University endowment fund, had reportedly been told by a METI adviser that it could be subject to a regulatory probe if the fund didn’t follow management’s recommendations last year. In the end, it abstained from voting.

Toshiba Corporation is critical to the Japanese economy as it is a major supplier of nuclear reactors and defence equipment. Activist investors have gained more power in Japan recently as corporate governance reforms promoting shareholder value mean that management cannot dismiss external pressure as easily, as reported by Bloomberg. In the past, big corporations have had, according to critics, little regard for the interests of private shareholders.

However, following a series of mismanagement scandals in the last few years, which in one case saw it pay a record fine following an accounting scandal, investors have been putting more pressure on how the company is run.

Nobuyuki Kobayashi, a director that was part of Toshiba’s audit committee, was also ousted as part of the shareholder coup.

Nagayama wrote an open letter to the shareholders at the beginning of the week, expressing “deep regret regarding recent unacceptable events at the company which have eroded your trust in us”.

He outlined a number of steps the board would be taking to improve the company’s governance, including conducting an inquiry into “why the unacceptable events occurred”, beginning a thorough search for new independent board members, and gathering feedback from shareholders on important strategic decisions.

Nagayama pledged to be an “agent of positive change, not a protector of the status quo”.

Shareholders voted on nine other director board member nominees, approving their places on the board. The voting tallies for each board member were not disclosed.

“The company recognises the seriousness of the rejection of some candidates for directors,” it stated in a press release.

Following the report’s publication, Toshiba’s board held an emergency meeting where it removed two of its directors from its list of board nominees for this year’s annual meeting.

Audit committee chair Juni Ota and audit committee member Takashi Yamauchi were removed and were scheduled to retire from the board at the following shareholder meeting. The pair were part of the audit committee charged by Toshiba with investigating last year’s meeting, which concluded that no collusion had taken place.

© Dennis Publishing

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