TOKYO, June 14 — Toshiba Corp’s chairman of the board today pushed back against investor calls to resign, saying he wanted to help right the crisis-hit Japanese conglomerate and would bring in new directors.
Toshiba has come under fierce scrutiny after an independent investigation last week revealed management colluded with Japan’s powerful trade ministry to block foreign investors from gaining board influence, in what one leading shareholder has called the world’s worst corporate scandal in a decade.
In response to the investigation, the once-storied conglomerate said over the weekend it would no longer be putting forward the names of two directors for re-election and that two other executives would also resign.
Those changes were not enough for proxy advisory firm Institutional Shareholder Services Inc (ISS) which today reiterated that Board Chairman Osamu Nagayama should step down – a call that has been echoed by other investors.
At a news conference, Nagayama apologised and said there were lapses in governance, but the former pharma executive said he wanted to stay on and help reconstruct management at Toshiba.
The company needs directors with a “global perspective” and a background managing similar firms, he said, adding Toshiba would call an extraordinary general meeting and speed up plans for a strategic review.
Toshiba said yesterday the chair of its audit committee, Junji Ota, and another committee member, Takashi Yamauchi, will retire as directors. The audit committee has come under criticism from investors for failing to take action even after its members became aware of the collusion against shareholders.
The two other company executives who will depart allegedly reached out to the Ministry of Economy, Trade and Industry (METI) seeking support in Toshiba’s battle against foreign shareholders over board nominees ahead of an annual general meeting last July, according to the investigators’ report.
Though oft-battered by scandal, as a manufacturer of nuclear reactors and defence equipment Toshiba remains hugely important to the Japanese government. Japan’s trade minister on Friday denied his officials directed an adviser to lean on Toshiba’s foreign shareholders.
The blame game
The shareholder-commissioned investigation has marked an explosive turn in a long battle between the company’s management and foreign shareholders and has renewed concern about governance in the world’s third-largest economy and its openness to foreign investors.
Toshiba’s second-largest shareholder, 3D Investment Partners – one of the investors that the investigators’ report said was targeted by METI – yesterday also called for the resignation of Nagayama, Ota, Yamauchi as well as another audit committee member, Nobuyuki Kobayashi.
Nagayama blamed Toshiba’s former CEO, Nobuaki Kurumatani, for helping pitch the company into crisis.
“There was a somewhat confrontational stance towards shareholders brewing from some time ago,” Nagayama said, when asked about the responsibility of the former chief executive.
“That’s an underlying cause in one sense for the current state of affairs.”
Nagayama today said some of the information detailed in the investigators’ report had been previously been mentioned in an earlier internal Toshiba report – an acknowledgement that provoked ire from some investors.
“It rings hollow for Chairman Nagayama...to try and shift the blame to just Kurumatani alone. If anyone should resign to take responsibility over the governance failures in monitoring management, it should be him,” said an investor in Toshiba declining to be identified due to the sensitivity of the matter.
Since the push by activist shareholders this year for greater accountability, Toshiba has faced and dismissed a US$20 billion bid from CVC Capital. But leading shareholders have called on it to explicitly seek offers from potential suitors.
Nagayama said the company has not received offers from private equity funds since CVC but a planned strategic review committee would be looking at various options including taking Toshiba private.
He added that he wanted to include two of the company’s foreign directors in the four- or five-member committee. Toshiba currently has four foreign directors among its 11-member board. — Reuters