Toshiba said on Sunday that two members of its board of directors will leave their positions, in response to the demand of some of the main shareholders, who are protesting a selection process held last year.
The group will not propose the names of Junji Ota and Takashi Yamauchi for another term, according to a statement after a special meeting held on Sunday. It also will not reappoint executives Masayasu Toyohara and Masaharu Kamo, the company said.
An independent investigation showed that Toshiba sought government assistance in an attempt to influence a key shareholder vote for the election of directors. The company “devised a plan to effectively prevent shareholders” from exercising their rights at a July 2020 meeting, working with Japan’s Ministry of Commerce to counter activist investors, according to a 139-page report released this week. passed and supervised by three attorneys.
“We take the observations of the attorneys very seriously and are committed to making inquiries with the help of outsiders, and reporting the result as transparently as possible,” Toshiba said in a statement Sunday. This Monday he will hold a press conference.
The advisory firm Institutional Shareholder Services recommended the vote against by five members of Toshiba’s board of directors, namely Osamu Nagayama, Ota, Nobuyuki Kobayashi Yamauchi and Ayako Hirota Weissman, according to a statement, reiterating the findings of the investigation that showed that the July 2020 shareholders’ meeting “was not handled fairly.”
Toshiba worked in unison with the ministry to lobby 3D Investment Partners, now its third-largest shareholder, which influenced their voting decisions, and to influence the vote of the Harvard University endowment fund.
3D demanded the resignation of Nagayama and three directors, Reuters reported on Sunday, citing a letter to shareholders.
The independent investigation also details how then-CEO Nobuaki Kurumatani met Yoshihide Suga, then chief cabinet secretary and now prime minister, before the general shareholders meeting to explain the situation to him in person.
On another occasion, senior executive Toshiba Kamo met with Suga, who, according to the report, expressed support for “energetic” action using the recently enacted Foreign Trade Law designed to protect industries from national security, according to the report. Suga on Thursday rejected the content of the report. “I don’t know about this,” Suga said earlier in the week. “There was no such thing.”
The findings stemmed from an investigation proposed by Singapore-based Effissimo Capital Management and Toshiba’s largest shareholder, which was approved in March. The confrontation between the low-key fund and one of the country’s most famous conglomerates has become a litmus test for the corporate governance of the world’s third largest economy.
At a briefing in Tokyo on Friday, Japanese Commerce Minister Hiroshi Kajiyama said the panel’s report did not shed definitive light, but did not rule out the possibility that the ministry would launch its own investigation into the findings.
Four external members of Toshiba’s board called the report “deeply disturbing”, saying that a change in both the board and the leadership was necessary.
Toshiba’s second largest shareholder on Sunday demanded the resignation of the chairman of the board and three other directors. The letter, sent to all four on Sunday according to a person with direct knowledge of the process, and seen by Reuters, is from 3D Investment Partners, which owns a 7.2% stake in Toshiba.
The revelations in the report commissioned by investors “are deeply concerning and represent one of the most prominent and shocking corporate governance failures of large listed companies around the world in the last decade,” the letter from 3D says.
The letter describes President Nagayama as “ultimately responsible for Toshiba’s recent governance failures, including the flawed internal investigation and the board’s determination to oppose an independent investigation.”