Toshiba and Japanese officials team up against foreign shareholders, report says

TOKYO – Toshiba Corp.

TOSYY 1.16%

worked closely with Japanese government officials to prevent overseas-based shareholders from exercising their rights, using inappropriate threats and language such as “beat them up,” a report commissioned by the company revealed .

The report recalled the days when Japan Inc. was a popular term to describe the perceived close connection between big business and government in blocking foreign influence in Japan.

Toshiba management sought to prevent commissioning of the report, which was written by three Japanese law firms, but shareholders voted in March to adopt it.

The report covered the months leading up to the shareholder vote on July 31, 2020, in which Toshiba CEO Nobuaki Kurumatani narrowly held his job and pushed back on efforts by overseas-based shareholders including Effissimo. Capital Management Pte, based in Singapore. Ltd. to put their own candidates on the board.

Effissimo and other shareholders outside of Japan at the time expressed dissatisfaction with Mr Kurumatani’s leadership and called for better returns for shareholders through buyouts or dividends. Mr Kurumatani resigned in April this year after an offer to acquire private equity firm CVC Capital Partners, which subsequently failed.

The 139-page report says Toshiba worked with the Ministry of Economy, Trade and Industry to strangle Effissimo. “We will ask METI to beat them for a while,” a Toshiba executive said in an email, according to the report.

The report said the ministry threatened Effissimo that he could be targeted under the national security provisions of a law involving foreign investment unless he gave up pressure on Toshiba’s management. The threats were a deviation from the intent of the law, making them highly problematic at best and a possible violation of laws or regulations at worst, according to the report.

Representatives from Toshiba and METI said they were reviewing the report and made no comments.

Nobuaki Kurumatani resigned from his post as CEO of Toshiba in April following pressure from shareholders.


Photo:

Press Yoshio Tsunoda / Zuma

Foreign activist investors, including US hedge funds, have played a larger role in Japanese companies in recent years, sometimes working in concert with management, and trade tensions with the United States have eased as companies like apple Inc.

have more access to the Japanese market.

Nonetheless, the Japanese government continues to view certain companies and industries as strategically sensitive and is working to contain foreign influence. Toshiba is a defense contractor and heavily involved in the cleanup of melted reactors at the Fukushima Daiichi nuclear power plant.

A METI official told another foreign investor he should avoid being seen as helping Effissimo, suggesting that even slight action hostile to the management of Toshiba would be like “barbecuing when a big fire [is] next to it, ”the report says.

“Toshiba, with the help of METI, was trying to effectively prevent shareholders from exercising” their voting rights, according to the report. Effissimo ultimately presented candidacies for directors at the shareholders’ meeting, but these were rejected.

Effissimo did not immediately comment on the report.

On at least two occasions, Toshiba officials consulted Yoshihide Suga, then chief government secretary and current prime minister, according to the report. In response, Mr. Suga told Japanese reporters, “I know absolutely nothing about this. “

The report states that Toshiba also worked with METI to have a METI advisor speak with Harvard Management Company, which manages the endowment of the University of Cambridge, Mass., And held Toshiba shares at the time of the July shareholders meeting. 2020.

Harvard did not exercise its voting rights at the meeting, which the report described as an unusual situation reflecting the university’s reluctance to risk legal exposure in Japan. A representative from Harvard Management declined to comment.

Write to Peter Landers at [email protected] and Megumi Fujikawa at [email protected]

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