Four senior Toshiba executives, including two board members, have been forced out of their positions after a heated four-hour emergency board meeting on Sunday.
The meeting, which propels one of Japan’s most famous industrial names even deeper into a governance crisis, followed the publication last week of a damning report into the company’s collusion with the government to suppress activist investors.
The 147-page independent report, which was compiled by outside lawyers, arose from an unprecedented shareholder revolt and provides explicit detail on the “dark arts” campaign orchestrated by Toshiba and officials from the Ministry of Economy, Trade and Industry (Meti). The report also alleges that the campaign was undertaken with the knowledge of the-then cabinet secretary — now prime minister — Yoshihide Suga, a claim he has denied.
The report’s contents horrified several of Toshiba’s board members. In a joint statement on Friday, four of the non-executive directors said that management and the board had taken actions that were “unacceptable and directly against the interests of our shareholders”. In a rare act of rebellion, they said they no longer supported the full slate of director candidates nominated by Toshiba for its annual shareholder meeting on June 25.
On Sunday, the same four board members released a statement saying they were pleased to note that “under the guidance of chairman [Osamu] Nagayama a number of important changes have been announced by Toshiba today”.
Despite that, several of Toshiba’s biggest shareholders said privately that they believed the situation called for the resignation of the board’s chair — a position that may gather momentum as investors consider whether to vote against the reappointment of Nagayama and other directors across the Toshiba board at the AGM.
The four ejected Toshiba executives include the head and a second member of the audit committee that earlier misled the board in concluding that there was no wrongdoing surrounding the company’s 2020 annual shareholders meeting. According to people close to the situation, Sunday’s board meeting debated whether all members of the audit committee should have, as a minimum, a Certified Practising Accountant (CPA) qualification.
Prominently named in the report — and among the four executives now being forced to step aside — were Masaharu Kamo and Masayasu Toyohara. Both executives dealt directly with the ministry: Toyohara, according to investigators, asked the government to “beat up” its most troublesome shareholders.
Kamo, who was poached from McKinsey only last year, was also considered a key executive behind the group’s turnround plan following an accounting and financial crisis.
The report centred on Toshiba’s 2020 AGM, at which the company’s largest investors led an effort to vote out Toshiba’s then chief executive, Nobuaki Kurumatani. He narrowly survived that vote, but through a process that the independent report concluded was “not fairly conducted”.
Kurumatani resigned in April, causing investors’ attention to focus on the board’s promise to appoint a strategic review committee (SRC) to steer the company through its crisis. One of the committee’s most urgent tasks, two of its largest investors told the FT, will be to assess potential bids for the company from private equity companies following a botched $20bn buyout offer from CVC.
Despite multiple intensified calls from both independent board members and investors for Toshiba to name the members of the SRC on Sunday, people close to the situation said that had still not happened.
In its first formal statement since the independent report was published, Toshiba said on Sunday that it would take action to identify the root cause of the issues surrounding the 2020 AGM.
“We will clarify responsibilities, take proper measures to prevent reoccurrence, and use this experience to enhance transparency in our management,” said Toshiba’s statement.