You are here: Home » International » News » Companies
Business Standard

Japan government contacted Toshiba shareholders before AGM: Report

The revelations raise further questions about interference in governance at Toshiba, following calls for an investigation into uncounted votes at the contentious July 31 shareholder meeting

Toshiba | Japan

Reuters  |  TOKYO 

Photo: Reuters
Photo: Reuters

By Makiko Yamazaki and Takashi Umekawa

TOKYO (Reuters) - Japan's government contacted several foreign shareholders in Corp ahead of the conglomerate's annual meeting, three people familiar with the matter said, in what at least one investor saw as an attempt to influence voting.

The revelations raise further questions about interference in governance at Toshiba, following calls for an investigation into uncounted votes at the contentious July 31 shareholder meeting.

Representatives of the powerful Ministry of Economy, Trade and Industry (METI) called at least three funds ahead of the meeting to inquire if they had collaborated with other investors, two of the people said.

The ministry was particularly focused on whether the funds collaborated with Toshiba's top shareholder, Effissimo Capital Management, communication that could violate rules preventing shareholders from "acting in concert", the two people said.

One of the funds interpreted METI's questioning as a signal to back Toshiba's management and not investor proposals at the meeting, one of the sources said. Foreign shareholders had proposed electing some new directors to the board, something management had opposed.

The sources declined to be identified because the information is not public.

METI declined to comment when contacted by Reuters, calling the allegations "rumours".

A representative for Effissimo said the fund could not comment. A spokeswoman said the company would not comment on speculation.

Reuters reported this month that about 1,300 postal voting forms went uncounted at the meeting.

Last month, a major investor called for an investigation, saying its vote had not been recognised.

Reuters previously reported activist fund Effissimo was kept in limbo by the government over its vote until the day before the gathering.

Together, the revelations have deepened concerns about the treatment of minority shareholders and what appears to be a retreat from the push for better governance in recent years.



Singapore-based Effissimo, which owned around 15% of but has since scaled that back to around 10%, had nominated three candidates to the Toshiba board. Effissimo has said Toshiba's governance has not improved since a 2015 accounting scandal.

Under Japanese regulations, shareholders deemed to be "acting in concert" can be required to submit ownership disclosure filings or, in some cases, can be charged with insider trading.

METI used a similar approach with several foreign shareholders last year, when U.S. hedge fund King Street Capital Management sought to replace a majority of the Toshiba board, according to one of the sources and another person.

King Street declined to comment.

Investors have often complained about what they say is ambiguity in the regulations. Some investors and experts also say the regulations prevent shareholders from working together to improve governance at

In 2017, when Japanese regulators revised the code, one of the public comments submitted to regulators complained the government failed to give investors assurance they could collectively engage with without infringing on regulations.

Nicholas Benes, head of the Board Director Training Institute of and an expert on governance, said Japanese regulators should come up with "safe harbour" criteria, similar to those in Britain, that prohibit use of insider information but allow investors to make joint recommendations to

Toshiba has been under pressure from activist funds since it sold 600 billion yen ($5.6 billion) of stock to dozens of foreign hedge funds during a crisis stemming from the bankruptcy of its U.S. nuclear power unit in 2017.

At the meeting, Toshiba CEO Nobuaki Kurumatani saw a precipitous slide in his support to just 58% from 99% a year earlier - a rare rebuke of a Inc chief executive.


(Reporting by Makiko Yamazaki and Takashi Umekawa; Additional reporting by Noriyuki Hirata; Editing by David Dolan and Lincoln Feast.)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, September 17 2020. 11:15 IST