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Japan’s minister denies officials asked an advisor to contact Toshiba shareholders

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Japan’s minister denies officials asked an advisor to contact Toshiba shareholders

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TOKYO (AP) – Japan’s trade minister denied on Friday that its officials had directed an adviser to lean on Toshiba Corp’s foreign shareholders to ensure that the administration won a key vote on board membership for the year. past.

The denials follow an explosive shareholder-commissioned investigation released Thursday that accused the government of colluding with Toshiba to pressure foreign investors to align themselves with management’s wishes.

Among its findings, the investigators’ report said that Toshiba, working in unison with the Commerce Ministry, “effectively asked” a government adviser, described as “Mr. M,” to negotiate with the University’s endowment fund. from Harvard to change his voting behavior.

“Ministry officials have informed me that it is not true that any request has been made to engage with individual investors,” Commerce Minister Hiroshi Kajiyama told a regular news conference.

He added that the ministry was awaiting Toshiba’s response to the report.

Sources have previously told Reuters https://jp.reuters.com/article/toshiba-board-idCNL1N2J4052 that Hiromichi Mizuno, an adviser to the ministry at the time, had told the Harvard fund that it could be subject to a regulatory investigation. if the fund did. failing to follow management’s recommendations at last year’s annual general meeting. Subsequently, the fund abstained from voting.

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Mizuno, a member of the board of Tesla Inc and who previously oversaw the $ 1.4 trillion Government of Japan Pension Investment Fund, is currently the United Nations Special Envoy on Innovative Finance and Sustainable Investment.

He did not immediately respond to a request for comment.

THE ‘LAST GASP’ OF A MINISTRY?

The independent investigation found that Toshiba had devised a plan to exert undue influence on Effissimo Capital Management, the largest shareholder of Singapore-based Toshiba, to withdraw the proposed candidates to the board.

The report also said that the plan sought to pressure another fund, 3D Investment Partners, in addition to the Harvard fund to change their votes and that Prime Minister Yoshihide Suga verbally encouraged them to pressure shareholders when he was chief cabinet secretary during a meeting with a senior Toshiba official. executive last year.

Suga, who left Japan yesterday to attend a meeting of G7 leaders in Britain, has denied that accusation.

The report discredits the efforts of Japan’s Financial Services Agency, as well as the Ministry of Commerce itself, to improve Japan’s corporate governance and comes as the country tries to polish its international reputation ahead of the 2020 Olympics in Tokyo on next month.

Some activist investors said, however, that the successful push by shareholders for independent research in a landmark vote this year and the report’s findings showed that progress was being made in Japan’s corporate governance.

“It is a direct result of Japan trying to have a world-class governance structure. It doesn’t mean they’re perfect yet, ”said Brian Heywood, CEO of Taiyo Pacific Partners, an activist fund that has operated in Japan for 20 years.

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“All of Japan Inc is not rushing to defend Toshiba,” he said, adding that he saw the debacle as a “last gasp” of capitalism controlled by Japan’s Ministry of Commerce.

GLASS LEWIS URGES A VOTE ‘NO’

Spelling more headaches for Toshiba, which has yet to say when it will respond to the investigators’ report, US proxy advisory firm Glass Lewis on Friday urged shareholders at this year’s AGM to vote against reelection of the Toshiba’s board chairman Osamu Nagayama and four others appointed to the board of directors by the company.

He called the investigators’ report “a rather damning indictment of the effectiveness of Toshiba’s main oversight body and its ability to credibly represent the interests of all investors.”

As one of the industrial conglomerates that modernized Japan and helped its economic recovery after World War II, Toshiba enjoys close ties with the government. His nuclear reactor and defense equipment businesses mean that he is also closely monitored by industry bureaucrats.

However, in 2017, hit by accounting scandals and massive write-offs in its US nuclear reactor business, Toshiba had to quickly seek a large injection of capital from foreign investors. As a result, activist investors are estimated to represent 25% of Toshiba’s shareholder base. It also had to sell its prized chip unit.

Since pushing activist shareholders this year for greater accountability, Toshiba has faced a $ 20 billion offer from CVC Capital and has seen former CEO Nobuaki Kurumatani resign in the subsequent tower.

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Although Toshiba has rejected that offer, it has announced that it will conduct a strategic review.

“Given the complete failure of Toshiba’s governance and the lack of transparency shown in the independent report, we believe that radical reform through privatization is the only viable option to rejuvenate the company,” said an executive of a major Toshiba shareholder. , who asked not to be identified because of the sensitivity of the matter.

Toshiba shares closed 1.6% lower on Friday compared to a broader flat market.

(Reporting by Makiko Yamazaki; Additional reporting by Rocky Swift, Takahiko Wada, Chang-Ran Kim and Daiki Iga; Written by Tim Kelly; Edited by Edwina Gibbs)

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In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.

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