Toshiba holds emergency board meeting as activist pressure mounts

Investors accuse conglomerate of deploying ‘dark arts’ to survive shareholder vote

Toshiba has held an emergency board meeting and called on Goldman Sachs for help as the Japanese technology conglomerate battles with an unprecedented shareholder revolt on two fronts.

The company, which has tried several strategies to revive its business, faces two demands for extraordinary general shareholder meetings.

Toshiba was accused by investors of deploying “dark arts” to survive a knife-edge shareholder vote in July. One egm request calls on Toshiba to fully investigate the way its agm was conducted.

The other demands that the company provide investors with a clearer explanation of its merger and acquisition ambitions.


Demand for egms are viewed by investors as a last resort. They remain extremely rare in Japan, despite increasing shareholder activism that has helped boost the Tokyo stock market. The appeals take Toshiba into uncharted territory and put exceptional pressure on Nobuaki Kurumatani, chief executive.

Toshiba has said it is studying both egm requests. People close to the company believe it is looking for ways to combine both demands into a single meeting.

At the hastily-convened meeting on Monday ahead of Japan’s long new year shut down, Toshiba’s board agreed to grant Mr Kurumatani and other senior executives powers to set the official “date of record”. This determines which shareholders are eligible to vote based on when they bought stakes and marks the first step in the process of holding an egm.

Shares in Toshiba rose as much as 2.1 per cent on Tuesday. That coincided with the Nikkei 225 index, of which Toshiba is not a constituent, rising 2.8 per cent to break through the 27,500-point threshold and hit its highest level since April 1990.

The first egm demand came on December 17th from Effissimo, a Singapore-based fund and Toshiba’s largest shareholder with a 9.9 per cent stake.

Effissimo has called on the company to appoint an independent committee to investigate whether the July agm was conducted fairly. That request followed a report by the Financial Times that certain investors felt pressured into withholding their votes as Toshiba and its advisers mounted an aggressive campaign to keep Mr Kurumatani’s shareholder approval rating over 50 per cent.

Uncounted votes

Separately, Sumitomo Mitsui Trust, Japan’s largest shareholder services company, discovered shortly after the agm that a large slab of votes had gone uncounted.

The Effissimo egm request caused panic within Toshiba, according to people close to the company, and prompted management to ask Goldman Sachs to reprise its role as adviser on defence against shareholder activism. Goldman has not decided whether to formally take on the role, the people said. The bank declined to comment on the matter.

Farallon Capital, another top Toshiba shareholder and one of the world's largest hedge funds, added to the Japanese company's woes with its own demand for an egm on December 25th.

Farallon has called on Toshiba management to explain what it believes is a sudden and poorly-justified change in its investment strategy. Toshiba announced in November that it planned to use its capital for “proactive investments on resources”. But Farallon said this policy was at odds with its previous plan of organic expansion and “programmatic M&A”, which it interpreted as smaller, bolt-on acquisitions.

Farallon also questioned Toshiba’s record of big transactions, noting that it had recorded about ¥1.8 trillion (€14.1 billion) in impairment losses over the past two decades “resulting from heedless growth investments through large-scale M&A, which have led to a reduction of shareholder capital and a crisis of solvency”.

Another investor in Toshiba shared Farallon’s concern about the group’s reported ¥1 trillion (€7.8 billion) investment plan for renewable energy, saying the company risked repeating past failures in M&A. Toshiba has said that it has yet to decide on a concrete investment plan at the ¥1 trillion level. – Copyright The Financial Times Limited 2020