Toshiba’s biggest shareholder labels board ‘ineffective’

Toshiba’s biggest shareholder has declared the Japanese conglomerate’s board “ineffective” and accused the company of failing to respond adequately to a report showing it colluded with the government to suppress activist investors.

Effissimo, the Singapore-based fund, told the Financial Times in its first comments since the report was published last week that the explosive findings provided a “sobering insight into dysfunctional corporate governance”.

The remarks come as other investors have called for Osamu Nagayama, Toshiba’s chair, or the whole board to be swept aside.

Toshiba held an emergency board meeting on Sunday following the release of the report and announced it would remove two members of the five-person audit committee, which investors and individual board members have accused of misleading the board.

Effissimo criticised the move as insufficient, saying its reluctance to remove the three remaining members showed Toshiba was “unwilling to hold the board members accountable”.

“This latest move does nothing more but add to the list of unresolved governance and compliance shortcomings at Toshiba that its board continues to not remedy,” Effissimo said. “Therefore, we view the current board to be ineffective.” 

The independent probe conducted by external lawyers was forced on the company by Effissimo to investigate Toshiba’s 2020 annual meeting. The report found the meeting was not fairly run and paints a picture of collusion between the company and the Ministry of Economy, Trade and Industry.

The report also alleged the campaign against activist shareholders was carried out with the knowledge of Yoshihide Suga, the prime minister who then served as chief cabinet secretary. Suga denies the allegation.

By contrast, Toshiba’s internal report into irregularities at the 2020 AGM found no problems — a conclusion that has intensified criticism of the board.

Effissimo, which holds a 9.9 per cent stake in Toshiba, demanded an extraordinary shareholder meeting in March at which it defeated management and demanded the independent probe. Many observers have viewed the campaign as a turning point for corporate Japan.

But the conclusion that the AGM was not conducted fairly has reignited concerns that corporate Japan does not hold shareholders’ rights in high regard.

Effissimo said the meeting and the ability of shareholders to express their rights through voting was the foundation on which joint stock companies rest.

“We are alarmed that the report has brought to light that this foundation has likely been severely compromised at Toshiba,” the fund added.