The management of Toshiba Corporation worked closely with representatives of the Japanese government in opposing foreign shareholders, writes The Wall Street Journal, citing a report prepared by three law firms at the request of some shareholders. The report describes the events leading up to a shareholder vote on July 31, 2020, when then-CEO Nobuyaki Kurumatani was re-elected to his post by a narrow margin and barred foreign shareholders, including Effissimo Capital Management Pte. Ltd., to hold their candidates to the board of directors.
Effissimo and other foreign investors have expressed dissatisfaction with Kurumatani’s policies and called for increased payments to shareholders through dividends and share repurchases.
Kurumatani resigned in April 2021 after Toshiba received a purchase offer from investment firm CVC Capital Partners, which was later turned down.
The report says that Toshiba partnered with Japan’s Ministry of Economy, Trade and Industry (METI) to counter Effissimo. The ministry threatened the investor with prosecution under the national security provisions of the Foreign Investment Act if he did not relinquish pressure on Toshiba’s management.
One of the METI officials told another foreign Toshiba shareholder that he should not help Effissimo. Toshiba, backed by METI, attempted to obstruct shareholders’ voting rights, the report said.
In addition, the authors of the report claim that top managers of Toshiba consulted at least twice with the current Prime Minister Yoshihide Suga, who was then the general secretary of the Japanese cabinet of ministers. Suga told reporters that he “knows absolutely nothing about this.”
As the WSJ notes, foreign investor activists, including American hedge funds, have begun to play a larger role in Japanese companies, sometimes working together with management.
However, the Japanese government continues to view certain companies and industries as strategically sensitive and tries to contain the influence of foreign investors on them. Toshiba carries out military orders and participates in the elimination of the consequences of the disaster at the Fukushima nuclear power plant.
Representatives from Toshiba and METI told the WSJ that they are studying the report and do not comment yet. Effissimo also declined to comment on the report.