Japan minister denies officials asked adviser to contact Toshiba shareholders
By Makiko Yamazaki
TOKYO (Reuters) -Japan's trade minister on Friday denied his officials directed an adviser to lean on Toshiba Corp's foreign shareholders to ensure management won a key vote on board membership last year.
The denials follow an explosive shareholder-commissioned investigation released on Thursday that accused the government of colluding with Toshiba to pressure foreign investors to fall in line with management's wishes.
Among its findings, the investigators' report said Toshiba, working in unison with the trade ministry, "effectively asked" a government adviser, described as "Mr. M", to negotiate with Harvard University's endowment fund to change its voting behaviour.
"Ministry officials have informed me that it's 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 waiting on Toshiba's response to the report.
Sources have previously told Reuters https://jp.reuters.com/article/toshiba-board-idCNL1N2J4052 that Hiromichi Mizuno, a ministry adviser at the time, had told the Harvard fund it could be subject to a regulatory probe if the fund did not follow management's recommendations at last year's annual general meeting. The fund subsequently abstained from voting.
Mizuno, a Tesla Inc board member and who previously oversaw Japan's $1.4 trillion Government Pension Investment Fund, is currently the United Nations Special Envoy on Innovative Finance and Sustainable Investment.
He did not immediately respond to a request for comment.
A MINISTRY'S 'LAST GASP'?
The independent investigation found Toshiba had devised a plan to put undue influence on Singapore-based Effissimo Capital Management, Toshiba's top shareholder, to withdraw its proposed board nominees.
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 encouraged pressure on shareholders when he was chief cabinet secretary during a meeting with a senior Toshiba executive last year.
Suga, who left Japan yesterday for a meeting of G7 leaders in Britain, has denied that allegation.
The report discredits efforts by Japan's Financial Services Agency as well as the trade ministry itself to improve Japan corporate governance and comes as the country tries to burnish its international reputation ahead of the 2020 Olympics in Tokyo next month.
Some activist investors said, however, that the successful push by shareholders for the independent investigation in a landmark vote this year and the report's findings showed progress was being made in Japan corporate governance.
"It's a direct result of Japan trying to really have a world class governance structure. It doesn't mean they're perfect yet," said Brian Heywood, CEO of Taiyo Pacific Partners, an activist fund that has operated in Japan for 20 years.
"All of Japan Inc isn’t rushing to Toshiba's defence," he said, adding that he saw the debacle as a "last gasp" of Japan's trade-ministry controlled capitalism.
GLASS LEWIS URGES 'NO' VOTE
Spelling more headaches for Toshiba, which has yet to say when it will respond to the investigators' report, U.S. proxy advisory firm Glass Lewis on Friday urged shareholders at this year's AGM to vote against the re-appointment of Toshiba board chairman Osamu Nagayama and four others nominated to the board by the company.
It called the investigators' report "a fairly damning indictment of the effectiveness of Toshiba's principal oversight body and its ability to credibly represent the interests of all investors."
As one of the industrial conglomerates that modernized Japan and helped its post-World War Two economic recovery, Toshiba enjoys close ties with the government. Its nuclear reactors and defence equipment businesses mean it is also closely monitored by industry bureaucrats.
In 2017, however, battered by accounting scandals and massive writedowns on its U.S. nuclear reactor business, Toshiba had to quickly seek a large 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 prized chip unit.
Since the push by activist shareholders this year for greater accountability, Toshiba has faced a $20 billion bid from CVC Capital and seen former CEO Nobuaki Kurumatani resign in the ensuing turmoil.
While Toshiba has dismissed that bid, it has announced it will conduct a strategic review.
"Given Toshiba's complete failure of governance and lack of transparency shown by the independent report, we believe radical reform through going private is the only viable option to rejuvenate the company," said an executive at a large Toshiba shareholder, asking not to be identified because of the sensitivity of the matter.
Toshiba's shares closed down 1.6% on Friday compared with a flat broader market.
(Reporting by Makiko Yamazaki; Additional reporting by Rocky Swift, Takahiko Wada, Chang-Ran Kim and Daiki Iga; Writing by Tim Kelly; Editing by Edwina Gibbs)
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