(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 exerted pressure on 3D Investment Partners, now its third-largest shareholder, which impacted its voting decisions, and worked to exert influence over how the 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 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.
“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: Secretive Hedge Fund Ends Long Silence to Take On Japan Icon
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.
In September, the Financial Times reported that Hiromichi 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 on Thursday said Toshiba had asked an advisor to Japan’s trade ministry to negotiate with the Harvard endowment to change its voting behavior. The report identified the person only as “Mr. M.”
Mizuno didn’t immediately respond to an e-mailed request to comment on Thursday.
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.
Read more: Toshiba Investors Back Hedge Fund’s Call to Probe AGM Voting
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