Toshiba aims to reassemble board after “management chaos”

Toshiba says it will speed up plans to diversify its board members and regain shareholder trust after a probe found that the company colluded with a Japanese government ministry to put pressure on activist shareholders.

Chairman Osamu Nagayama told the press the company is aiming to include more foreigners and new voices on its board to ultimately strengthen it, as reported by Nikkei Asia.

"We will hold discussions with shareholders and take their opinions into account during the process to reconstruct the board," Nagayama said. He added that at some point an extraordinary general meeting will be held to elect new candidates.

The results of an independent probe were shared last week which highlighted how Toshiba's management colluded with Japan's Ministry of Economy, Trade, and Industry (Meti) to lay pressure on activist shareholders.

Three lawyers conducted the investigation and stated in the report that Toshiba requested Meti's support for measures to counter activists at its AGM last year and worked in unison with the government ministry to "deal with shareholders". The lawyers concluded that the AGM was "not fairly managed".

Following the report's publication last week, Toshiba's board held an emergency meeting on Sunday where it removed two of its directors from its list of board nominees for this year's AGM, which is set to take place on June 25.

Audit committee chair Juni Ota and audit committee member Takashi Yamauchi were removed and will retire from the board at the next shareholder meeting. The pair were part of the audit committee when Toshiba carried out its own investigation of the previous AGM which found no problems.

"Given the investigative report it was decided that it would have been difficult to receive understanding from shareholders regarding Ota's and Yamauchi's reappointments," added Nagayama.

Two other executives were named in the investigation and will step down too.

Nagayama also criticised former Toshiba CEO Nobuaki Kurumatani who resigned in April, stating that the company lacked governance and said that the board cannot ignore his role in "causing the current management chaos and undermining the trust of shareholders".

Kurumatani abruptly resigned in April and was replaced by Satoshi Tsunakawa ahead of a $20 billion takeover bid from CVC Capital Partners. Sources told Reuters that CVC's offer to take over the company and retain incumbent management was a way to protect Kurumatani from activist shareholders who were pushing for an independent probe into whether investors were pressured to support desired board nominations.

In the end, CVC suspended its consideration of a buyout offer after weeks of turmoil.