(Bloomberg) — Toshiba Corp. sought government help in an attempt to influence a key shareholder vote that installed its slate of directors, an independent probe has found in a vindication for investor activism in Japan.
The voting, which went against nominees put up by Singapore-based Effissimo Capital Management, wasn’t fairly managed, according to the results of an investigation by several law firms that Toshiba shared. The Japanese electronics-to-energy conglomerate “devised a plan to effectively prevent shareholders” from exercising their rights, working with Japan’s trade ministry to counter activist investors.
The firm worked in unison with the ministry to exert pressure on 3D Investment Partners, now its third-largest shareholder, which impacted its voting decisions, and to influence how Harvard University’s endowment fund would vote. As a result, “the AGM was not fairly managed,” the 139-page report overseen by three lawyers concluded.
The report also details how then-Chief Executive Officer Nobuaki Kurumatani met with Yoshihide Suga, at the time the chief cabinet secretary and now the prime minister of Japan, ahead of the AGM to explain the situation in person.
On another occasion, senior Toshiba executive Masaharu Kamo met Suga, who the report said expressed support for “aggressive” action to use the Foreign Exchange and Foreign Trade Act, recently enacted legislation designed to protect industries core to national security, according to the report. Suga on Thursday rejected the contents of the report.
“I know nothing of this,” Suga said when asked by reporters in Tokyo about comments attributed to him in the report. “There was no such thing.”
Read more: Secretive Hedge Fund Ends Long Silence to Take On Japan Icon
The findings emerged from a probe proposed by Effissimo — Toshiba’s largest shareholder — and approved in March. The standoff between the secretive fund and one of the country’s most storied conglomerates has become a litmus test for Japan Inc. and corporate governance across the world’s No. 3 economy.
At a briefing in Tokyo on Friday, Japanese Trade Minister Hiroshi Kajiyama denied that he had asked a former senior adviser, Hiromichi Mizuno, to get involved with Toshiba, although he said Mizuno had given advice on occasion. Kajiyama said the panel’s report didn’t shed definitive light on what happened, but didn’t rule out the possibility that the ministry will start its own investigation into the findings.
In September, the Financial Times reported that Mizuno, the former chief investment officer of the Government Pension Investment Fund and a board member of Tesla Inc., spoke to Harvard University’s endowment fund ahead of the vote, after which the fund abstained from voting.
The panel’s report said conversations with Harvard happened at the behest of the trade ministry, though they identified the person only as “Mr. M.” The lawyers who compiled the report declined to say at a briefing on Thursday if Mizuno was Mr. M. Mizuno didn’t respond to an e-mailed request to comment.
Toshiba’s shares slid as much as 1.8% in Tokyo on Friday.
“The company is at a fork in the road,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Had shareholders not voted in favor of Effissimo’s resolution, this malfeasance would have been swept under the carpet. Going forward, we would like to see management work constructively towards increasing shareholder value.”
Read more: Toshiba Investors Back Hedge Fund’s Call to Probe AGM Voting
Effissimo tried last year to have co-founder Yoichiro Imai named to Toshiba’s board, along with other directors. When that proposal was rejected and management’s own slate of directors appointed instead, it was seen as a setback for activists who sought more influence at a conglomerate plagued by years of accounting scandals and business missteps.
Suspicion followed that the vote count had not been entirely above board. The investigation however found no issue with the handling of postal voting at the AGM. One shareholder with a 1.3% stake had reported that its votes weren’t counted, despite being mailed several days before the deadline.
Toshiba said it would review the report and announce its own comments on the conclusions at a later date. Before the independent probe was approved at the March AGM, Toshiba had said it saw “no validity or reasonable grounds” to further investigate the matter.
(Updates with share action and ministry’s response from the fourth paragraph)
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