Toshiba chair pledges inquiry into ‘unacceptable events’

The chair of Toshiba has pledged a full inquiry into the “unacceptable events” at the company as the industry veteran prepares to defend his position at the annual shareholders’ meeting next week.

In an open letter to shareholders published after a week of simmering tensions between investors and management of the Japanese conglomerate, Osamu Nagayama expressed regret for the erosion of trust in the company and laid out a series of urgent measures to improve governance.

His letter comes a week after Toshiba’s reputation was hammered by an independent report, successfully demanded by activist shareholders, which concluded that the group’s 2020 AGM had not been conducted fairly and alleged collusion between the company and government to suppress activist shareholders. 

“In order to stop recurrence, we will conduct an inquiry, with third party participation, into why the unacceptable events occurred, put new preventive measures into place, and establish a robust compliance culture,” Nagayama said in the letter published on Friday.

He added that Toshiba would begin a search for new independent board members and would accelerate the quest to find a successor to Satoshi Tsunakawa, who has served as interim chief executive since the abrupt resignation of Nobuaki Kurumatani in April.

Nagayama’s letter follows an online meeting he and Tsunakawa held on Wednesday with about 80 of the company’s shareholders. 

“As the chairperson my priority is to provide Toshiba with the governance and leadership that you deserve,” Nagayama wrote. “I pledge to you that I will continue to be an agent of positive change, not a protector of the status quo.

Although Nagayama, a veteran of Sony and Chugai Pharmaceutical, joined Toshiba’s board after the events exposed in the report, large investors and proxy advisory services have called for shareholders to vote against his reappointment at the AGM on June 25. 

Investors’ main criticism of Nagayama is focused on his position as chair of the board at the time when Toshiba conducted its own internal investigation into allegations that last year’s annual meeting had not been fairly run. The probe found no significant problems and has since been decried by large shareholders as a calculated whitewash.

Last Sunday Toshiba said it was removing two of its nominations from its slate of directors up for election next week — an exceptionally rare move in corporate Japan.

In a statement on Thursday, the secretive Singapore-based fund Effissimo, Toshiba’s largest shareholder with a stake of 9.9 per cent, labelled the board “ineffective”. But some investors have defended Nagayama, arguing that his actions since the report had shown the kind of leadership that the company needed in a crisis.

Before joining Toshiba’s board last year, Nagayama has been credited with transitioning Chugai into a global player through its capital tie-up with Switzerland’s Roche in 2002. As chair of Sony’s board from 2013, he helped the entertainment group fend off an activist campaign by Daniel Loeb and strengthened its governance structure.

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