Nobuaki Kurumatani, former Toshiba chief
Nobuaki Kurumatani told one of his senior executives that Toshiba’s efforts to suppress moves by activist investors would not fall to its financial advisers, but would be mostly handled by the government © Tomohiro Ohsumi/Bloomberg

The depth of collusion between Toshiba, the Japanese government and the former investment head of the world’s biggest pension fund to influence board nominations last year has been laid bare by an independent probe.

A 147-page report released on Thursday details the collaboration between the company and the government and alleges that Japanese prime minister Yoshihide Suga, who was chief cabinet secretary at the time, received updates on activists’ campaigns ahead of the July 2020 annual meeting, which it ultimately concluded was “not fairly managed”. 

Based on text messages, emails and other correspondence, the report describes how senior figures at the Ministry of Economy, Trade and Industry collaborated with Toshiba’s senior management to prevent executives being voted out of their positions. The investigators conclude that the plot included “acts suspected to be against laws” and represented an attempt to unfairly restrict the exercise of shareholder rights.

Central to the campaign was Nobuaki Kurumatani, then chief executive of Toshiba who faced a knife-edge vote to approve his reappointment which he narrowly survived. He resigned in April amid fears that he might fail to win approval at the 2021 annual meeting later this month and following a botched $20bn buyout offer from private equity group CVC. 

The report, compiled by three lawyers including the head of O’Melveny & Myers’s Tokyo office, accuses the Japanese conglomerate of devising “a plan to effectively prevent shareholders from exercising their shareholder proposal and voting rights at the AGM by giving undue influence to shareholders”. 

In a highly revealing text message, Kurumatani told one of his senior executives that Toshiba’s efforts to suppress moves by activist investors would not fall to its financial advisers — Goldman Sachs and Nomura — but would be mostly handled by the government. He is quoted as writing: “METI will play the main role this time.”

The scandal surrounding Toshiba’s 2020 AGM was, to many investors, the culmination of five years of extraordinary turmoil at Japan’s most famous industrial conglomerate. A series of calamities have included an accounting fraud, the collapse of the US nuclear unit, the sale of the prized chip business and a narrowly-avoided delisting from the Tokyo Stock Exchange. Investors have long suspected that Toshiba enjoyed unusually high levels of protection from the Japanese government, and that shareholder interests were consistently suppressed.

Toshiba was forced to accept the independent probe after losing a proxy battle with its largest shareholders in March.

One of Toshiba’s shareholders said that its findings “confirms our worst, worst fears about the relationship between the Japanese government and its biggest corporations. The question everyone is going to be asking themselves now is whether this was an isolated incident”.

The report stands in stark contrast with Toshiba’s internal investigation into the meeting, which concluded there were no problems.

“There is no way as either a shareholder or a director that I would be supportive of a number of the candidates which have been nominated by the company for the upcoming AGM,” Raymond Zage, a non-executive director of Toshiba, told the Financial Times after the report was released. The information previously provided to the board on the issue of METI involvement, he added, had been “highly misleading”.

The report is especially damaging to the reputation of Hiromichi Mizuno, the former chief investment officer of Japan’s $1.6tn Government Pension Investment Fund (GPIF), a Tesla board member and a high-profile champion to ESG investors around the world.

Mizuno’s efforts, which were first revealed by the FT, were focused on influencing the voting of the Harvard Management Company — one of Toshiba’s largest shareholders at the time. By last year’s AGM, Mizuno was acting as an executive adviser to METI: the report concluded that he used that position to influence HMC to the point where it abstained from voting at the meeting.

The report also cast doubt on Mizuno’s account of events. In March Mizuno told the FT: “I told Harvard very clearly that I was not representing the Japanese government. I offered to give them [Harvard] a better understanding of the situation in Tokyo on a friendly basis.” 

On Thursday, Toshiba and METI said they would review the report. Mizuno, described as “Mr M” in the report, was not immediately available for comment. Both Mizuno and METI have earlier denied to the FT that he was acting on the instructions of the government.

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