Toshiba chairman ousted over governance scandal

July 9, 2021

Japanese electronics giant Toshiba’s chairman has been ousted from his role by shareholders at the company’s AGM held on 25 June.

The vote, prompted by the outcome of an independent probe, was instigated by shareholder Effissimo.

Osamu Nagayama lost his bid for re-election after 56% of shareholders voted against him. Similarly, audit committee member Nobuyuki Kobayashi has been removed from his role after only receiving 25% of the vote.

Such moves against board members at large Japanese companies are rare, marking a clear victory for corporate governance advocates.

The vote followed an independent investigation that found that the company had “worked closely” with the Japanese government to dissuade foreign shareholders from proposing or supporting director nominees.

It was alleged that Toshiba was trying to influence the Harvard University endowment fund over voting at its AGM. Toshiba has denied the allegation and an internal investigation did not find any evidence of wrongdoing.

Despite this, Effissimo, which holds a 9.9% stake in the Japanese company, successfully proposed an independent investigation through an EGM in March 2021.

The 147-page report found that collusion between Toshiba and the Japanese government was rife, with communications between the company and government outlining how to prevent executives being ousted from their positions.

In a statement, Effissimo said that it would continue to demand higher standards of governance to “enhance” Toshiba’s “long-term corporate value”.

The problems represent another hindrance for Toshiba, which has been plagued by corporate scandals over recent years. In February 2002, 26 fictitious transactions totalling ¥43.5 billion ($396.7 million) were uncovered at a subsidiary, while a $1.2 billion accountancy scandal in 2015 marred its global reputation and led to the exit of chief executive and president Hisao Tanaka.

Over 30% of shares held in Japan are owned by foreign nationals, a newly released survey has found – the highest rate in three years.

Last month, Mitsubishi UFJ Financial Group’s board survived a shareholder proposal to align the business with global climate change targets – something that is growing in prevalence among Japanese corporations.