Proxy adviser Glass Lewis & Co. blasted Toshiba Corp.’s board for poor governance amid repeated scandals and recommended investors vote against all directors at the company’s shareholders meeting this month.
In a 25-page report, the U.S. firm details years of accounting troubles at the Japanese icon, clashes with accountants over financial statements, weak internal controls and management missteps that have put investors at risk of seeing their shares delisted from the Tokyo Stock Exchange.
Toshiba said in 2015 that it had overstated profits for seven years and paid a record fine, only to reveal this year that it would have to take a write-down in its nuclear business of more than $6 billion.
Toshiba is now racing to sell off assets, including its prized memory chip business, to cover the losses in its Westinghouse nuclear business and avoid the delisting.
The leading bidders for the chips business are Broadcom Ltd. and a group led by Bain Capital LP and Innovation Network Corp. of Japan, and Toshiba aims to pick the winner this month.
“The repeated revelations of the accounting irregularities at both the company and subsidiary levels have cast significant doubt over the effectiveness of the group’s internal controls, as well as the internal financial reporting procedures and auditing systems in place to avoid the kind of problems that have occurred,” wrote Shigemichi Yoshizu, an analyst at Glass Lewis.
The firm detailed why it has advised against every director, naming six for participating in the board’s audit committee or in top management during the scandals. The report singles out the current chief executive officer, Satoshi Tsunakawa, who took over as part of a house cleaning last year.
It states: “We are troubled that nominee Tsunakawa served as the representative director and president of Toshiba Medical Systems Corp., the parent company of Toshiba Medical Information Systems Corp., when the accounting irregularity at the former subsidiary took place. In our view, his seniority within Toshiba Medical Systems Corp. is of sufficient concern that, in our opinion, Mr. Tsunakawa does not have the proper oversight to protect shareholder concerns at this company as well.”
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