People head to a shareholders' meeting of Toshiba Corp. in Tokyo on June 25, 2021. (Kyodo)
TOKYO (Kyodo) -- The president of Toshiba Corp. pledged Friday to win back trust from shareholders after the Japanese industrial conglomerate was found to have colluded with the government to influence foreign activist investors, in yet another governance scandal to engulf the firm.
Toshiba CEO Satoshi Tsunakawa made the promise at its annual general shareholders' meeting before they vote on Toshiba's new lineup of 11 directors, including board chairman Osamu Nagayama who has faced calls from some foreign investors to resign.
"We will work to restore trust from all stakeholders, including shareholders," Tsunakawa said.
Toshiba is scrambling to repair its reputation after an investigation by independent lawyers found that the company, seen by the government as critical to national security, sought help from Japan's industry ministry to fend off overseas investors like Effissimo Capital Management Pte. Ltd. ahead of an annual shareholders' meeting last year.
The probe, commissioned by some of Toshiba's overseas investors, has exposed governance issues at Toshiba, already hit by an accounting scandal in 2015, and raised questions about how much the government should be allowed to interfere with private companies under the name of protecting national security.
Fearing foreign activist investors would gain influence over the board last year, Toshiba attempted to take advantage of a Japanese law allowing the government to monitor overseas shareholders for national security reasons, according to the lawyers' investigation.
Toshiba is a Japanese household name with its business portfolio spanning nuclear power, defense equipment and semiconductors.
Among the 11 director candidates pending approval, Nagayama's reappointment is in focus as he has defied pressure from some overseas investors who see him as unqualified and instead vowed to be "an agent of positive change" for Toshiba. Still, former U.S. Ambassador to Japan John Roos has thrown support behind him after both served as outside directors at Sony Corp.
In a rare development less than two weeks ahead of the shareholder's meeting, Toshiba dropped two nominees who sat on its audit committee from its original slate of 13 directors pending approval.
Toshiba's recent face-off with activist shareholders comes in the wake of its acceptance of foreign funds to resolve its financial hardships following the bankruptcy of U.S. nuclear plant unit in 2017. Around 50 percent of Toshiba shareholders are overseas investors.
Among major shareholders, Singapore-based 3D Investment Partners Pte. Ltd. reportedly demanded Nagayama resign immediately. Norges Bank Investment Management, which manages the Norwegian government pension fund, has voted against him.
U.S. proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis have recommended that Nagayama not be reappointed, along with Nobuyuki Kobayashi, another member of Toshiba's audit committee that found no issue with how the July 2020 shareholders meeting was held.
Singapore-based Effissimo has slammed Toshiba over its reluctance to hold the board accountable for the scandal that revealed "dysfunctional" governance.
The Ministry of Economy, Trade and Industry has ruled out the possibility of carrying out its own investigation into the alleged collusion with Toshiba.
The roughly 120-page investigation report released on June 10 states that former Toshiba CEO Nobuaki Kurumatani is believed to have explained Toshiba's situation regarding foreign investors last year to Chief Cabinet Secretary Yoshihide Suga, now the Japanese prime minister, in a breakfast meeting.
Kurumatani stepped down in April after a buyout plan by British private equity firm CVC Capital Partners apparently caused friction within management. Nagayama has laid the blame on Kurumatani who took a "confrontational" approach to shareholders.
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