Analysis: 'Shuttle Diplomacy Gone Bad': How Japan's investing star became embroiled in Toshiba board dispute
16/07/2021 12:00
By Ross Kerber and Makiko Yamazaki
BOSTON/TOKYO, July 16 (Reuters) - Hiromichi Mizuno's
connections, spanning from the Japanese government to Harvard
University, made him a guiding voice among climate-focused
investors worldwide.
Now those ties have placed his own conduct under scrutiny
after an independent report focused on Mizuno's role in alleged
collusion between the management of Toshiba Corp 6502.T and
Japan's trade ministry to block foreign investors from gaining
board influence at the conglomerate.
The revelations helped lead to the ouster of Toshiba’s
chairman last month. urn:newsml:reuters.com:*:nL2N2O701Y
Mizuno said in a recent interview that he put no pressure on
Harvard and only volunteered to help the endowment understand
how things worked in Japan. He and government officials have
challenged the report's conclusions and said it does not reflect
Mizuno's account. urn:newsml:reuters.com:*:nL2N2O503S
The dispute highlights the tension between the two strands
of Mizuno's career - the champion of sustainable investment and
the government insider - at a time when foreign shareholders are
trying to judge Japan's receptivity to overseas investment.
Abby Adlerman, an adviser to corporate boards and CEO of
Boardspan, a provider of corporate governance software, said it
would have been better if Mizuno had recused himself from the
talks at Harvard. "All of this recognition and access to
information means he is pulled in different directions as to his
loyalties and has responsibilities to many parties," she said.
The current situation, she said, is "shuttle diplomacy gone
bad."
Mizuno said he only volunteered to help university officials
as a part of the Harvard community, where he was about to start
an academic fellowship.
“I did what I could to help both Harvard and the Japanese
government" make informed decisions, he said.
PUSHING MANAGERS
The report's description of a powerful government insider
throwing his weight around contrasts with the civic-minded
persona that Mizuno cultivated as chief investment officer of
Japan's $1.6 trillion Government Pension Investment Fund (GPIF)
and burnished as a Tesla Inc TSLA.O director.
Mizuno earned an MBA from Northwestern University and joined
the GPIF in 2015 from London-based private equity firm Coller
Capital.
The post gave him a platform to become a prominent voice
pushing for considering environmental, social and governance
(ESG) issues in investment decisions.
But his approach caused friction with people concerned GPIF
would become actively involved with the Japanese stock market or
push beyond its enabling legislation, according to a Harvard
Business School case study about his efforts.
Mizuno left the GPIF last year but retained his government
connection as a special adviser at Japan's Ministry of Economy,
Trade and Industry (METI), holding the position until being
named a United Nations special envoy on sustainable investment
in December.
"He's got a style which is not traditional, and that
sometimes makes people uncomfortable. But he's perceived by the
international crowd as an important champion of ESG practices,
and that makes him a hero outside of Japan," said Alicia Ogawa,
who leads a center focused on Japanese corporate governance at
Columbia University.
'SOMEONE WITH CONNECTIONS'
Mizuno's academic fellowship was at Harvard Business School,
distinct from Harvard Management Co., or HMC, which runs the
university's $41 billion endowment. HMC held a 4% Toshiba stake,
one of the single largest chunks of shares, which drew Toshiba's
attention when it sought to lobby investors against outside
director candidates last summer.
The company also sought intervention from METI, which could
use new foreign investment rules to block the nominees.
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When that didn't work and HMC declined to meet with Toshiba,
METI gave the company Mizuno's name as "someone with connections
to HMC," according to the shareholder-commissioned
investigation, conducted by three lawyers. urn:newsml:reuters.com:*:nL2N2O61AZ
Yet Mizuno would be an unlikely messenger to tell a
shareholder to back off, having spent years stressing governance
issues.
He once cautioned on Twitter against Japan's foreign
investment rules, worried they gave overseas investors
"impressions of a setback in corporate governance or
anti-shareholder activism."
He told Reuters nobody asked him to deliver messages to HMC,
and that he told METI Harvard was not an activist but rather "a
very sophisticated long-term investor. I volunteered to talk to
Harvard to prove my point. METI didn't stop me."
Mizuno said HMC leaders welcomed his input. HMC officials
declined to comment.
Masayoshi Arai, Director-General of METI's Commerce and
Information Policy Bureau, said that although a METI official
gave Mizuno's name to Toshiba, "He simply told Toshiba that
Mizuno was being asked by HMC to give advice; he never said
Toshiba should ask Mizuno or METI would ask Mizuno".
The report found that after talks with Mizuno, HMC did not
vote, an outcome helpful to Toshiba.
Some analysts say it remains unclear how METI will apply the
new law to foreign investors, and the head of the Tokyo Stock
Exchange has called for more detail from Toshiba. urn:newsml:reuters.com:*:nL3N2OH0I7
Arai said Japan is open to foreign investment although
national security concerns must take a top priority.
urn:newsml:reuters.com:*:nL2N2NX0IP
METI may have been happy to leave it to Mizuno to talk to
Harvard, said Ulrike Schaede, a University of California
professor following Japanese business, but it still remains
unclear how open officials want Japan’s economy to become.
“The Toshiba case is bringing to the fore the burning issue
on where on this spectrum Japan wants to fall,” Schaede said.
Mizuno declined to comment on his views about the new trade
rules. But, he said, he is known as someone who takes
“instruction from nobody.”
(Reporting by Ross Kerber in Boston and by Makiko Yamazaki in
Tokyo; Editing by David Dolan and Gerry Doyle)
((ross.kerber@thomsonreuters.com; (617) 856 4341; Reuters
Messaging: Ross.Kerber.Reuters.com@Reuters.net))