Toshiba’s largest investor escalates clash with management

Toshiba’s largest investor escalates clash with management


Toshiba’s largest investor has significantly escalated its clash with management by calling for an extraordinary general meeting and an independent investigation into allegations that a knife-edge shareholder vote was conducted unfairly.

The move by Effissimo, a secretive Singapore-based activist fund that owns 9.9 per cent of Toshiba, breaks almost three months of stalemate that followed the company’s July 31 annual shareholder meeting. 

Despite the steady rise of activism in mainstream Japanese corporate life over the past three years, the threat of the EGM remains powerful and rare. Toshiba now has eight weeks to respond to the request, after which Effissimo can take the matter to court.

Toshiba said it would “carefully review” the request and consider how to deal with it.

In a statement issued along with its demand for the EGM, Effissimo highlighted big concerns surrounding the July shareholder meeting, at which Toshiba’s chief executive, Nobuaki Kurumatani, survived a vote on his reappointment with just 58 per cent support.

Effissimo initially raised these concerns in a letter to the company in September, where it also called for a third-party committee to be established to investigate. That committee has not been formed and, according to people close to the fund, there has yet to be an adequate explanation from Toshiba.

“It remains opaque whether the 181st AGM was conducted in a fair and impartial manner, and this situation has not been rectified,” said Effissimo in its December 17 letter to Toshiba requesting the EGM.

It added that in the name of transparency and the fair and impartial operation of shareholder meetings, it was necessary to “bring to broad daylight the actual state of the 181st AGM through an investigation conducted by independent investigators”. Effissimo offered the names of three senior Japanese corporate lawyers to form the committee.

In September the Financial Times revealed that, ahead of Toshiba’s July AGM, the former head of Japan’s $1.3tn Government Pension Investment Fund (GPIF) held private discussions with Harvard Management Company, which subsequently abstained from voting.

At the same time, Toshiba had engaged Goldman Sachs to defend it against activists, as part of what some investors described as a campaign that deployed “all the dark arts”. 

Ahead of its call for an EGM, Effissimo said it had interviewed dozens of other Toshiba shareholders and discovered that some had felt pressured to abstain from exercising their voting rights.

Also in September, another large Toshiba shareholder, 3D, discovered that the votes on about 5m of its shares had not been counted by Sumitomo Mitsui Trust, the shareholder services firm that administered the voting for Toshiba.

In an admission that sent shockwaves across the Tokyo market, Sumitomo Mitsui Trust later said it had probably miscounted votes at the AGMs of more than 1,000 Japanese companies over the years. It remains under investigation by the Financial Services Agency.

Toshiba’s AGM in July followed a series of disagreements between Toshiba and Effissimo, which led to the fund and others leading an investor rebellion against Mr Kurumatani.

Unlike the CEOs of other large Japanese companies, Mr Kurumatani’s position was particularly vulnerable to such a move.

In the wake of the 2017 financial crisis that brought Toshiba to the brink of bankruptcy, the group issued $5.4bn in new equity — a move that was strongly resisted in some quarters of the Japanese government and which abruptly filled the Toshiba shareholder register with an unusually large number of foreign hedge funds and activists.



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