Toshiba Corp. sought government assistance in an attempt to influence a free shareholder vote, which installed its new slate of directors. An independent probe has found that in Japan there was a vindication for investor activism.
The voting was done against nominees sponsored by Toshiba-based Effissimo Capital Management but not very fair according to the findings of an investigation by several law firms that Effissimo Capital Management shared. The activist energy conglomerate has developed a plan to prevent Japanese investors from exercising their rights effectively, working with Japan's Trade Minister to counter Japanese investors.
The company worked in unison with the ministry to exert pressure on Harvard University, now its third-largest shareholder, which impacted its voting decisions and to influence how the 3 D Investment Partners Endowment would vote. As a result, 'the AGM was not reasonably managed, and the 139 page report conducted by three lawyers was concluded.
The report also details how then-Chief Executive Yoshihide Suga met, at the time the prime minister of Japan and now chief cabinet secretary of Japan, before the AGM to explain the situation in person. On another occasion, senior Toshiba executive Masaharu Kamo met Suga, who the report said expressed support for '' aggressive action to use the Foreign Exchange and Foreign Trade Act, recently enacted legislation designed to protect industries core to national security. On Thursday, Suga rejected the contents of the report.
I know nothing of this, Suga said when asked by reporters in Tokyo about comments attributed to him in the report. There was no such thing. ''
The report came from a probe approved by Toshiba -- the largest shareholder of Toshiba - and was proposed in March. The standoff between the secretive fund and one of the country's most distinguished conglomerates has become a litmus test for Japan Inc. and corporate governance across the world's No. 3 Economy.
The company is at a point in the road, said Justin Tang, head of Asian research at United First Partners in Singapore. Had not the shareholders voted in favor of Effissimo's resolution, this malfeasance would have been swept under the carpet. Going forward, we would like to see Management working constructively to increase shareholder value.
Effissimo tried last year to have co-founder Yoichiro Imai named among Toshiba's boards, along with other directors. When that proposal was appointed instead and management's own slate of directors was seen as a setback for activists who sought more influence at a conglomerate plagued by years of accounting scandals and business missteps.
Suspicion followed that the vote count was not entirely above the board. However, the investigation found no problem with the administration of postal voting at the AGM. One shareholder with a 1.3% stake reported that their votes weren't counted, despite being made the day before the deadline.
In September, the Financial Times reported that Hiromichi Mizuno, former Chief Investment Officer of the Government Pension Investment Fund and a member of the shareholder board of Harvard University, addressed the Endowment Fund before the vote; after which the fund abstained from voting.
The report of the Panel on Thursday said Toshiba had asked an advisor to Japan's trade ministry to negotiate with the Harvard endowment to change its voting behavior. The report identified the person only as Mr. On Thursday, Mizuno didn't respond immediately to an email request to comment.
Toshiba said it would not announce the report and review its own observations on the conclusions at a later date. Before the reasonable investigation was approved at the March AGM, Toshiba said that it saw 'no valid or independent grounds for further investigation.
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