The Harvard endowment fund abstained from a vote on the reappointment of Nobuaki Kurumatani, a crucial boost for the Toshiba chief executive © AFP/Getty Images

The former investment chief of Japan’s $1.3tn state pension fund intervened personally to influence the Harvard University endowment fund in what investors say was a “dark arts” campaign to shield the chief executive of Toshiba from activist shareholders. 

The revelations surrounding Hiro Mizuno, former chief investment officer of the Government Pension Investment Fund and a Tesla board member, have raised concerns over the Japanese technology group’s tactics to neutralise activists in the run-up to its pivotal July 31 annual meeting. Toshiba also engaged Goldman Sachs to co-ordinate its anti-activist defence measures, the people added.

Mr Mizuno had private discussions over voting intentions with Narv Narvekar, chief executive of Harvard Management Company, as Toshiba looked to sway investors and proxy advisory services, according to people with direct knowledge of the situation.

The conglomerate’s efforts to ensure Nobuaki Kurumatani, chief executive, survived a vote on his reappointment were successful. But the victory has raised questions over whether some investors felt undue pressure to change their vote.

Last week, Singapore-based activist fund Effissimo, Toshiba’s largest shareholder with a stake of almost 10 per cent, sent an online survey to an undisclosed number of other investors asking whether they had voted “in a manner inconsistent with intentions”.

Mr Mizuno held an online meeting with Mr Narvekar about two weeks before Toshiba’s AGM, following which Harvard decided to abstain from voting on Mr Kurumatani’s reappointment, according to four people familiar with the situation. Before that conversation, they said, Goldman Sachs had told Toshiba the ballot would be extremely close and identified HMC as one of several potential swing votes. 

Mr Mizuno referred during the meeting to Toshiba’s deep connections within the Japanese government and the possibility that a “no” vote by HMC could affect its reputation, according to one person familiar with the conversation.

The abstention of Harvard, which held a stake of about 4.5 per cent in Toshiba at the time of the AGM — making it one of its largest investors, was a crucial boost for Mr Kurumatani, who survived the vote with just 58 per cent approval.

While Japanese chief executives can theoretically be ousted at any AGM, many are protected by large numbers of shareholders whose support is guaranteed. 

But Mr Kurumatani’s position is more vulnerable. Toshiba is currently trading on the second section of the bourse, as punishment by the stock exchange for financial irregularities. It is not, therefore, widely held by the passive funds that track the Topix and Nikkei and tend to support company management.

More critically, when faced with financial disaster in 2017, Toshiba engaged Goldman Sachs to issue $5.4bn in new equity — a move that was strongly resisted by the Ministry for Economy, Trade and Industry and which brought hedge funds and activists on to the shareholder register. 

When those activists became a threat ahead of the AGM, Toshiba engaged the same Goldman Sachs team — known for its experience in defending Japanese companies — to sway the opinion of proxy advisory services ISS and Glass Lewis, as well as large global asset managers including BlackRock and Fidelity.

Mr Mizuno’s involvement was separate from Goldman Sachs’s efforts. It has come to light as factions within the Japanese government, and in particular at Meti, took a direct interest in the AGM outcome, said people with knowledge of the situation. 

“Toshiba and its allies became increasingly frenetic ahead of the AGM,” said one large Toshiba shareholder. “The more vulnerable Mr Kurumatani’s position seemed, the more unorthodox the methods of securing his survival seemed to become. It was dark arts at their best. We made sure that we had lawyers in every meeting.”

Toshiba, Goldman Sachs and Mr Mizuno declined to comment.

Harvard Management Company said it does not comment on individual investments.

Letter in response to this article:

Japan Inc’s image hit by reports of intimidation / From Alicia Ogawa, Director, Project on Japanese Corporate Governance and Stewardship, Center on Japanese Economy and Business, Columbia Business School, NY, US

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