The depth of the collusion between Toshiba, the Japanese government and the former investment chief of the world’s largest pension fund to influence board appointments last year has been exposed by an independent investigation.
147-page report released Thursday details company-government collaboration and alleges Japanese Prime Minister Yoshihide Suga, who was then chief cabinet secretary, received campaign updates from activists ahead of the July 2020 annual meeting, which he ultimately concluded was “not managed fairly”.
Based on text messages, emails and other correspondence, the report describes how senior officials in the Ministry of Economy, Trade and Industry worked with Toshiba senior management to prevent that executives be removed from their posts. Investigators conclude that the plot included “acts suspected of being against the law” and represented an attempt to unfairly restrict the exercise of shareholder rights.
At the heart of the campaign was Toshiba’s then chief executive Nobuaki Kurumatani, who faced a knife vote to approve his reappointment, which he barely survived. He resigned in April amid fears he would not get approval at the 2021 annual meeting later this month and following a botched $ 20 billion takeover offer from the group of CVC private equity.
The report, compiled by three lawyers including the Tokyo bureau chief of O’Melveny & Myers, accuses the Japanese conglomerate of developing “a plan to effectively prevent shareholders from exercising their shareholder proposal and voting rights. at the AGM by giving undue influence to shareholders “. .
In a very revealing text message, Kurumatani told one of his senior executives that Toshiba’s efforts to crack down on activist investor initiatives would not fall to its financial advisers – Goldman Sachs and Nomura – but would be mostly run by the government. He is quoted as writing: “METI will star this time.”
The scandal surrounding Toshiba’s 2020 AGM was, for many investors, the culmination of five years of extraordinary turmoil in Japan’s most notorious industrial conglomerate. A series of calamities have included accounting fraud, the collapse of the US nuclear unit, the sale of the prized chip business and a narrowly avoided delisting from the Tokyo Stock Exchange. Investors have long suspected that Toshiba enjoyed an unusually high level of protection from the Japanese government and that shareholder interests were being systematically suppressed.
Toshiba was forced to accept the independent investigation after losing a proxy battle with its major shareholders in March.
One of Toshiba’s shareholders said his findings “confirm our worst, worst fears about the relationship between the Japanese government and its biggest companies. The question everyone is going to ask themselves now is whether this was an isolated incident ”.
The report contrasts sharply with Toshiba’s internal investigation of the meeting, which concluded that there had been no issues.
“There is no way, as a shareholder or director, that I will endorse a number of candidates who have been nominated by the company for the next annual general meeting,” said Raymond Zage, non-executive director of Toshiba , to Financial A few times after the publication of the report. The information previously provided to the board on the issue of METI’s involvement, he added, was “very misleading”.
The report is particularly damaging to the reputation of Hiromichi Mizuno, the former investment director of the $ 1.6 billion Government of Japan Pension Investment Fund (GPIF), a member of the Tesla board of directors. and leading champion of ESG investors around the world.
Mizuno’s efforts, first revealed by the FT, were aimed at influencing the vote of Harvard Management Company, one of Toshiba’s largest shareholders at the time. At last year’s AGM, Mizuno acted as METI’s executive advisor: the report concluded that he had used this position to influence HMC to the point of abstaining from voting at the meeting.
The report also cast doubt on Mizuno’s account of events. In March, Mizuno told the FT, “I made it very clear to Harvard that I am not representing the Japanese government. I offered to give them [Harvard] a better understanding of the situation in Tokyo on a friendly basis.
On Thursday, Toshiba and METI announced they would review the report. Mizuno, described as “Mr. M” in the report, was not immediately available for comment. Mizuno and METI previously denied to the FT that it was acting on government instructions.