Toshiba investors win historic victory over management

A long-awaited showdown between Toshiba and its two largest investors has resulted in embarrassment for the conglomerate and an unprecedented display of shareholder strength in Japan.

Historic vote in favor of investigation into Toshiba’s conduct follows five years of growing confidence shareholder activism against the conservative strongholds of Japanese companies. The result of Thursday’s extraordinary general meeting, which was expected to be very close, sparked immediate speculation among investors that Toshiba’s senior management, including chief executive Nobuaki Kurumatani, could be forced to resign.

EGM, a rarity in Japan that prompted Toshiba to hire Goldman Sachs to help fend off the threat, was convened at the request of its two major shareholders.

Effissimo, the Singapore-based activist investor and largest shareholder in Toshiba, called on the company to launch an independent investigation into what it considers potentially inappropriate circumstances surrounding last year’s annual meeting. These include an “unprecedented shareholder removal”. Several of the main areas in question, including the role of the former investment manager of the $ 1.6 billion Japanese government pension fund, were first reported by the Financial Times.

The Effissimo proposal was passed, despite Toshiba’s strenuous efforts to convince shareholders that such an investigation was not necessary.

A separate proposal, which required a higher bar to pass and emanated from US firm Farallon Capital, called on Toshiba to clarify its intentions for large-scale mergers and acquisitions and explain what the fund saw as contradictions in the statements by recent strategy. It has not been approved by investors.

Farallon, Toshiba’s second largest shareholder, said after the results: “Shareholder vote at EGM sends a clear message to Toshiba’s board and management team: shareholders expect greater transparency and accountability . “

Effissimo and Farallon have criticized Toshiba’s management, especially the management of Kurumatani, a former banker who was appointed chief executive in 2018 to turn things around after an accounting scandal and the collapse of its nuclear business in the United States.

Effissimo called on Toshiba’s management to cooperate with the independent investigation to restore shareholder confidence after its proposal was approved. “Support for the proposal demonstrates the strong commitment of shareholders to protect their most fundamental right – the right to vote,” he added.

Toshiba had rejected Effissimo’s request, saying an investigation by its audit committee found no direct evidence that it was involved in “undue interference” at last year’s AGM.

Prior to the EGM, proxy advisers ISS and Glass Lewis both recommended Toshiba investors vote in favor of Effissimo’s proposal. A number of global asset managers have also revealed their support for the Singapore-based fund, including Calpers and the California State Teachers’ Retirement System, the two largest pension funds in the United States. Others included Norges Bank, the world’s largest sovereign wealth fund.

During the 70-minute meeting, several of the more than 100 retail investors who attended the EGM seemed baffled by the two shareholder proposals and asked for an explanation of why Toshiba had come to this point in time. first place.

“What really happened?” asked a retail investor. “If there was indeed excessive pressure, it would have to be investigated, but if Effissimo talks about something that never happened, these are unnecessary costs.”

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