TOKYO, June 25 (Reuters) – Toshiba’s (6502.T) board appointed CEO Satoshi Tsunakawa as interim chairman on Friday after investors voted to oust his predecessor in a stunning rebuke for its collusion with the Japanese government against shareholders.
Tsunakawa’s appointment came after shareholders delivered a clear message to management by voting out Osamu Nagayama as chairman and another director over the handling of the scandal, which has put Japan’s corporate governance under the microscope.
“The company recognises the seriousness of the rejection,” of the two, Toshiba said in a statement.
The board said in a separate statement that it had would identify a permanent successor for Tsunakawa and would consider external candidates and use a global executive search firm.
It also said it would expand the scope of a newly-formed strategic review committee, which would undertake a full review of assets and devise a plan focused on creating growth via share buybacks and dividends.
The board said it would “engage with potential strategic and financial investors,” leaving open a possible further shake-up.
Tsunakawa retook the helm in April after Toshiba’s previous CEO left, but has said he does not plan to stay for too long.
Ousters of board members at Japanese companies, particularly household names like Toshiba, are extremely rare.
“This result is a sign of a paradigm shift in Japan and will only embolden activist investors whether foreign or domestic,” said Justin Tang, head of Asian research at United First Partners in Singapore.
But supporters of Nagayama say his failure to win re-election will only set back Toshiba further, depriving the industrial conglomerate, which has lurched from crisis to crisis since an accounting scandal in 2015, of experienced leadership.
A breakdown of the vote was not immediately disclosed.
One Toshiba source, who was not authorised to speak to the media, said foreign investors had voted in greater numbers than in previous shareholder meetings as they saw it as an important test case of corporate governance in Japan.
How the government responds has yet to seen, but so far Trade Minister Hiroshi Kajiyama has been unapologetic about his ministry’s dealings with Toshiba, saying the policies it implemented were natural ones for the ministry to take.
Toshiba makes defence equipment and nuclear reactors and is strategically important to the government.
“In general the hope is that corporate governance can be improved through discussions with shareholders and at the same time we work to secure the stable development of businesses and technology that are important from a national security standpoint,” he told a regular news conference ahead of the AGM.
On Thursday, Akira Amari, a former economy minister and an influential lawmaker in the ruling Liberal Democratic Party, accused activist investors of focusing only on short-term profits and called for better monitoring of such investors to protect economic security. read more
Shares in Toshiba closed down 0.6%. The stock has increased by around two-thirds in value this year, bolstered by a $20 billion bid for the company by private equity company CVC Capital. Although Toshiba has dismissed that bid, it has promised the strategic review.
Nagayama’s ouster could help activist shareholders push the company to consider take-private offers. Since CVC’s bid, event-driven hedge funds have been actively buying Toshiba shares, making the shareholder roster potentially more favourable for activists, investor sources have said.
Nagayama, who was seen as cautious about such offers, only joined Toshiba’s board in mid-2020 after the alleged pressuring of foreign shareholders to vote in line with management’s board nominees took place.
A former Chugai Pharmaceutical (4519.T) CEO and Sony Group Corp (6758.T) board director, he is well respected and both the electronics giant and former U.S. ambassador to Japan John Roos had expressed their support for him.
But his critics argued he should step down to take responsibility for the board’s resistance to address the allegations.
Shareholder advisory firms Institutional Shareholder Services Inc and Glass Lewis had recommended shareholders not reappoint him, while 3D Investment Partners, Toshiba’s Singapore-based No. 2 shareholder with a 7.2% stake, had called for his resignation.
3D Investment said in a statement after the result that it hoped the AGM marked the beginning of a new era and it looked forward to constructive, ongoing dialogue with Toshiba’s board and management team.
Toshiba nominated 11 directors at the AGM, including Nagayama. Nobuyuki Kobayashi, a member of the audit committee, was also voted out.Reporting by Makiko Yamazaki; Writing by Tim Kelly; Editing by Edwina Gibbs
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