Toshiba set to review board and leadership, major Japanese pension fund says

Toshiba logos are pictured at Toshiba Corp’s annual general meeting with its shareholders in Tokyo, Japan on June 25, 2021. REUTERS / Kim Kyung-Hoon / File Photo

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TOKYO, Jan. 12 (Reuters) – Toshiba Corp’s (6502.T) proposal to split into three companies will not solve its governance problems, and the conglomerate is expected to prioritize an overhaul of its board of directors and its management, said a senior executive at one of the largest pension funds.

Ken Hokugo, director of corporate governance at the Pension Fund Association (PFA), said the interests of Toshiba’s management and shareholders are “not aligned”.

“The most orthodox solution out of the way is to get someone on the board who can oversee and discipline management, and let the reshuffled board select the new chief executive,” he said in written responses to Reuters questions.

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Hokugo declined to comment on how the PFA, which owns an undisclosed number of Toshiba shares, would vote on the plan to split the conglomerate into three companies – one for energy and infrastructure, another for electronics. and a third to house its flash memory. chip assets.

Nonetheless, his comments underscore the general concern of shareholders about Toshiba, marking a rare public statement by an influential Japanese pension fund, which is part of an industry that generally remains silent about the companies in which they invest.

The PFA, which provides benefits to people who have left their employee retirement programs, is one of the country’s largest pension funds with 12.5 trillion yen ($ 108 billion) in assets.

Foreign shareholders expressed further concern, however, with several of them having strained relations with Toshiba management after it was discovered by a shareholder-commissioned investigation last year that they had colluded with the Ministry of Commerce to blunt their influence.

Toshiba said in a statement to Reuters that its board and management firmly believe the disruption plan was “the best way to create additional value for our stakeholders.”

Hokugo noted successful turnarounds at Olympus Corp (7733.T) and chipmaker JSR Corp (4185.T), both of which invited shareholder ValueAct Capital to sit on the board. “As a result of reviews assisted by a ValueAct partner, their corporate values ​​have skyrocketed,” he said.

Some Toshiba shareholders have told Reuters they are publicly or privately pushing the company to conduct a more in-depth review that would take into account potential private equity offers.

Toshiba did not formally solicit takeover bids during a five-month strategic review before deciding on the split, giving the impression that a split was inevitable for management, Hokugo said.

He also said it was understandable that some shareholders wanted to see a private equity deal, as the privatization of Toshiba could allow for drastic measures that might not be possible for a listed company.

Hokugo also stressed that it should be up to shareholders, not management, to decide the best option to increase the value of the company.

Toshiba plans to hold a special shareholders’ meeting in March to assess shareholder support for the break-up plan, but the exact date and deadline for shareholder approval has yet to be decided.

He will also brief investors on February 7 and 8 on the business strategies of the companies that will be created as a result of the breakup.

Years of accounting scandals and governance issues have seen Toshiba’s market value drop by more than half to around $ 18 billion from its peak in the early 2000s.

($ 1 = 115,4,500 yen)

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Reporting by Makiko Yamazaki; Additional reporting by Yuki Nitta; Editing by David Dolan and Edwina Gibbs

Our Standards: Thomson Reuters Trust Principles.

Dolores W. Simon