• Kyodo

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Toshiba Corp.’s biggest shareholder, Effissimo Capital Management Pte, called on the group’s management Thursday to improve its “dysfunctional” governance, after an independent probe found the Japanese conglomerate had colluded with the government in influencing foreign activist investors.

In its first public statement since lawyers concluded earlier this month that Toshiba’s general shareholders’ meeting last year was not conducted fairly, Singapore-based activist fund Effissimo said it was alarmed that the very foundation on which a joint stock company rests had been compromised.

With this year’s general shareholders’ meeting coming up on June 25, Effissimo slammed the current Toshiba board as “ineffective,” despite its decision to remove two outside directors from the list of nominees pending shareholder approval.

The investigation report “gives sobering insight into dysfunctional corporate governance,” said Effissimo, which holds around a 10% stake in Toshiba, in a statement.

According to the investigation, Toshiba sought help from Japan’s industry ministry in blocking proposals from activist shareholders including Effissimo ahead of the July 2020 shareholders’ meeting.

As Toshiba is considered critical to national security, due to its involvement in the defense equipment and nuclear power sectors, it attempted to take advantage of a law allowing the government to keep foreign investors in check, the investigation launched at the request of foreign investors including Effissimo found.

On Sunday, following the release of the findings on June 10, Toshiba changed its slate of board director nominees to drop two current members on the company’s audit committee — which, in the firm’s own probe, had concluded there were no problems with last year’s shareholders’ meeting.

Toshiba, a household name, acknowledged that its efforts to lean on foreign investors with government help were problematic from the viewpoint of governance and compliance.

Nonetheless, the chairman of the board, Osamu Nagayama, has defied calls from some investors to step down, saying his priority is to rebuild the board.

Effissimo said the removal of only two nominees indicates Toshiba is unwilling to hold board members accountable.

“This latest reactive move does nothing more but add to the list of unresolved governance and compliance shortcomings at Toshiba that its board continues to not remedy. Therefore, we view the current board to be ineffective,” Effissimo said, adding that it will continue to engage “constructively” with Toshiba.

Toshiba is planning to identify the root cause of the latest incident with the participation of third parties, while the Ministry of Economy, Trade and Industry has so far ruled out the possibility of carrying out its own probe.

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