Japan’s trade minister on Friday denied that his officials instructed an adviser to rely on Toshiba Corps (6502.T) foreign shareholders to ensure management won a key vote on board membership last year.
The denials follow an explosive shareholder-ordered investigation released Thursday in which it accused the government of collaborating with Toshiba to pressure foreign investors to fall in line with management̵
Among the findings, investigators’ report said Toshiba, working closely with the Department of Commerce, “effectively asked” a government adviser, described as “Mr. M,” to negotiate with the Harvard University Scholarship Fund to change its voting behavior.
“Ministry officials have informed me that it is not true that any request was made to engage with individual investors,” Trade Minister Hiroshi Kajiyama told a regular press briefing.
He added that the ministry was awaiting Toshiba’s response to the report.
Sources have previously told Reuters that Hiromichi Mizuno, then a ministerial adviser, had told the Harvard Foundation that it could be subject to a legislative inquiry if the foundation did not follow management’s recommendations at last year’s general meeting. The fund then abstained.
Mizuno, a board member of Tesla Inc (TSLA.O) and formerly overseeing Japan’s $ 1.4 trillion state pension investment fund, is currently the UN Special Envoy for Innovative Financing and Sustainable Investment.
He did not immediately respond to a request for comment.
A SERVICE ‘LAST GASP’?
The independent investigation revealed that Toshiba had devised a plan to unduly influence Singapore-based Effissimo Capital Management, Toshiba’s largest shareholder, to withdraw its proposed board members.
The report also said 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 called for pressure on shareholders when he was chief cabinet secretary during a meeting with a senior Toshiba last year.
Suga, who left Japan yesterday for a meeting with G7 leaders in the UK, has denied this claim.
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 seeks to burn out its international reputation before the 2020 Olympics in Tokyo next month.
However, some activist investors said the successful push from shareholders for the independent inquiry in a milestone vote this year, and the report’s findings showed that progress was being made in Japanese corporate governance.
“It’s a direct result of Japan trying to really have a world – class management structure. That does not mean they are perfect yet,” said Brian Heywood, CEO of Taiyo Pacific Partners, an activist fund that has operated in Japan for 20 years. year. .
“The whole of Japan Inc. is not rushing to Toshiba’s defense,” he said, adding that he saw the debate as a “last gasp” of the Japanese Ministry of Commerce’s controlled capitalism.
GLASS LEWIS URGER ‘NO’ VOICE
Spelling more headaches for Toshiba, which has not yet said when it will respond to the investigators’ report, US proxy consulting firm Glass Lewis on Friday urged shareholders at this year’s general meeting to vote against the reappointment of Toshiba’s chairman Osamu Nagayama and four others nominated to the board of directors of the company.
It called the investigators’ report “a rather condemnatory accusation of the effectiveness of Toshiba’s main regulatory 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 has close ties to the government. Its nuclear reactors and defense equipment companies mean that it is also closely monitored by industry bureaucrats.
In 2017, however, Toshiba had to be hit hard by accounting scandals and massive write-downs on its US nuclear reactor company quickly seeking a major capital injection from overseas investors. As a result, activist investors are estimated to account for 25% of Toshiba’s shareholder base. It also had to sell its precious chip unit.
Since the pressure from activist shareholders this year for greater accountability, Toshiba has had a $ 20 billion bid from CVC Capital and seen former CEO Nobuaki Kurumatani retire in the ensuing turmoil.
While Toshiba has rejected this bid, it has announced that it will conduct a strategic review.
“Given Toshiba’s complete failure of governance and the lack of transparency set out in the independent report, we believe that a radical reform by going private is the only possible way to rejuvenate the company,” said a major Toshiba director. shareholder and asked not to be identified because of the sensitivity of the case.
Toshiba’s shares closed 1.6% on Friday compared to a flat wider market.
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