Toshiba should overhaul board and management, major Japan pension fund says (updated)

JSR

12/01/2022 10:32

(Adds Toshiba comment, paragraph 8)
    By Makiko Yamazaki
    TOKYO, Jan 12 (Reuters) - Toshiba Corp's  6502.T  proposal
to split itself into three companies won't solve its governance
issues and the conglomerate should prioritise an overhaul of its
board and management, said a senior executive at one of Japan's
largest pension funds.
    Ken Hokugo, corporate governance director at the Pension
Fund Association (PFA), said the interests of Toshiba management
and shareholders are "not aligned".
    "The most orthodox solution to the discrepancy is to bring
onto the board someone who can monitor and discipline
management, and to let the revamped board to select the new
chief executive," he said in written responses to Reuters
queries.
    Hokugo declined to comment on how the PFA, which owns an
undisclosed amount of shares in Toshiba, would vote on the
conglomerate's plan to break up into three companies - one for
energy and infrastructure, another for electronic devices and a
third to house its flash memory chip assets.
    Nonetheless, his comments highlight broad shareholder
concern about Toshiba, marking a rare public pronouncement from
an influential Japanese pension fund, part of an industry that
typically stays silent about companies they invest in.
    The PFA, which provides benefits to people who have left
their employee pension programmes, is one of the country's
largest pension funds with 12.5 trillion yen ($108 billion) in
assets.
    Foreign shareholders have, however, been more vocal about
their concern, with several of them having a tense relationship
with Toshiba management after it was found by a
shareholder-commissioned investigation last year to have
colluded with the trade ministry to blunt their influence.
    Toshiba said in a statement to Reuters that its board and
management firmly believe the break-up plan is "the best path to
create additional value for our stakeholders."
    Hokugo noted successful turnarounds at Olympus Corp  7733.T 
and chip materials maker JSR Corp  4185.T , which both invited
shareholder ValueAct Capital to take a board seat https://www.reuters.com/business/finance/japan-inc-activist-investors-come-cold-2021-04-21.
 "As a result of overhauls assisted by a ValueAct partner, their
corporate values shot up," he said.
    Some Toshiba shareholders have told Reuters they are
publicly or privately pushing the firm to do a more thorough
review that would take into account potential private-equity
bids.

    Toshiba failed to formally solicit buyout offers during a
five-month strategic review before deciding on the break-up,
giving the impression that a split was a foregone conclusion for
management, Hokugo said.
    He also said it was understandable that some shareholders
wanted to see a private equity deal as taking Toshiba private
could allow for drastic measures that may be not possible for a
listed company.
    Hokugo also stressed that it should be up to shareholders,
not management, to decide on the best option to increase
corporate value.
    Toshiba plans to hold an extraordinary shareholder meeting https://www.reuters.com/business/toshiba-shareholder-calls-extraordinary-meeting-vote-break-up-plan-2022-01-06
 in March to gauge shareholder support for the break-up plan,
but the exact date and what the bar will be for shareholder
approval have yet to be decided.
    It will also brief investors on Feb. 7-8 on the business
strategies of the companies to be created from the break-up.
    Years of accounting scandals and governance issues have seen
Toshiba's market value more than halve to around $18 billion
from an early 2000s peak. 
($1 = 115.4500 yen)

 (Reporting by Makiko Yamazaki; Additional reporting by Yuki
Nitta; Editing by David Dolan and Edwina Gibbs)
 ((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))