Four key points from investigation into Toshiba’s governance
Japan’s influential trade ministry colluded with Toshiba Corp’s management to unduly influence a key shareholder vote last year, the report of an independent probe released on Thursday found.
Here are some takeaways from the report:
TOSHIBA ASKED MINISTRY FOR HELP
Toshiba’s management turned to the Ministry of Economy Trade and Industry (METI) for assistance ahead of its annual general meeting (AGM), as it faced pressure from activist shareholders.
“Toshiba requested METI’s support for the so-called measures to counter the activists at the AGM” and “worked in unison” with the ministry “to deal with shareholders”, the report found.
FOREIGN OWNERSHIP RULES WERE KEY
Reuters last year reported how rules introduced in 2020 and designed to protect industries critical to Japan’s national security may have been used to put pressure on Toshiba’s top shareholder, Effissimo Capital Management.
The independent probe highlighted how those revised foreign ownership rules were used to keep foreign investors in check.
In one case, Singapore based 3D Investment Partners was told by METI that it could be subject regulatory scrutiny under the rules if it backed an Effissimo proposal.
BREAKFAST WITH SUGA
The report details a July 2020 breakfast meeting between then Chief Cabinet Secretary Yoshihide Suga, who is now the prime minister, and a senior Toshiba executive.
Suga allegedly told the executive: “If we are aggressive, we can get them with the (foreign ownership rules),” according to the report.
Asked about his alleged comment, Suga told reporters: “I am absolutely not aware of that. There was nothing of that sort.”
AUDIT COMMITTEE FAILED IN OVERSIGHT
At least one member of Toshiba’s audit committee saw emails where executives made remarks such as “We will ask METI to beat them up for a while,” suggesting that the executives, with METI’s help, were trying to prevent shareholders from exercising their rights, the report found.
The audit committee did not take action, the report said.
“The audit committee did not report these issues to the board of directors as problematic… in light of this, we believe that Toshiba’s audit committee was unable to fully perform its check and balance function.”