Toshiba should overhaul its board and management, says major Japanese pension fund | Investment News

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

Ken Hokugo, director of corporate governance at the Pension Fund Association (PFA), said the interests of Toshiba management and shareholders are “misaligned”.

“The most orthodox solution to the sidelines is to bring someone to the board who can oversee and discipline management, and let the revamped board pick the new CEO,” he said. he said in written responses to questions from Reuters.

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

Nonetheless, his comments underscore widespread shareholder concern about Toshiba, marking a rare public statement from an influential Japanese pension fund, part of an industry that is generally silent about the companies they invest in.

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

Foreign shareholders have, however, expressed concern, with several having strained relations with Toshiba management after a shareholder-commissioned inquiry was uncovered last year for colluding with the Ministry of Trade to blunt their influence.

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

Hokugo noted successful turnarounds at Olympus Corp and chip materials maker JSR Corp, both of which invited shareholder ValueAct Capital to join the board. “As a result of redesigns assisted by a ValueAct partner, their company values ​​have increased,” he said.

Some Toshiba shareholders told Reuters they were publicly or privately pushing the company for further review that would consider potential private equity offers.

Toshiba did not formally seek takeover offers during a five-month strategic review before deciding on the breakup, giving the impression that a split was a foregone conclusion for management, Hokugo said.

He also said it was understandable that some shareholders would want to see a private equity deal, as taking Toshiba privatized 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 company’s value.

Toshiba plans to hold an extraordinary meeting of shareholders in March to gauge support of the shareholders to the plan of rupture, but the exact date and what will be the bar for the approval of the shareholders have not been decided yet.

He will also update investors on February 7 and 8 on the business strategies of the companies that will be created from the breakout.

Years of accounting scandals and governance issues saw Toshiba’s market value more than halve to around $18 billion from its peak in the early 2000s.

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

Copyright 2022 Thomson Reuters.

Dolores W. Simon