Japan government adviser pressured Harvard with talk of probe before Toshiba vote -sources (updated)

Mizuno

24/12/2020 03:04

* Adviser said vote against management may trigger probe
-sources
    * Adviser referred to rules about coordinated voting
-sources
    * Harvard abstained, later learnt no basis for probe
-sources
    * Japan's government has called for improved corporate
governance

 (Adds Mizuno's comment on Twitter)
    By Makiko Yamazaki
    TOKYO, Dec 24 (Reuters) - A Japanese government adviser told
the Harvard University endowment fund that its vote at Toshiba
Corp's  6502.T  annual shareholders meeting could be subject to
a regulatory probe should it vote against the firm's management,
four sources said.
    As a result, the U.S. university abstained from voting,
three of the sources said. It later learnt there was no basis
for any probe, two of them said.
    The alleged comment by Hiromichi Mizuno, special adviser to
the Ministry of Economy, Trade and Industry (METI), is at odds
with Japan's push for improved corporate governance and adds
attention to a meeting that has drawn shareholder complaints.
    The Financial Times previously reported Mizuno told the fund
a vote against management would damage Harvard's reputation. His
mention of a potential probe and other details of his dialogue
with the university are reported here for the first time.
    Mizuno did not respond to Reuters' requests for comment sent
both by registered mail and direct message to his actively used
Twitter account.
    Following Reuters' publication of this article, Mizuno wrote
on Twitter: "I am a METI adviser and a Harvard senior fellow and
have a long relationship of trust with the endowment fund and as
such, I am sometimes called on for consulting.
    "However, it is extremely regrettable that this article,
which is based on testimony from anonymous sources, is written
as if the CEO/CIO was threatened by me on behalf of METI over
the exercise of voting rights."
    A METI official said the ministry was not in a position to
comment on the matter, and that it never asked Mizuno to contact
Toshiba shareholders.
    Mizuno is the former chief investment officer of Japan's
$1.4 trillion Government Pension Investment Fund, and a current
board member of U.S. electric vehicle maker Tesla Inc  TSLA.O .
Reuters could not determine his relationship with Toshiba.
    A Toshiba spokeswoman said the firm was not in a position to
comment. A spokesman for the Harvard Management Company declined
to comment, while its chief executive, N.P. "Narv" Narvekar, did
not respond to a request for comment. The four sources declined
to be identified as the matter was private.
    
    DETERIORATION
    Mizuno approached Harvard weeks before the July 31 meeting
after hearing it was frustrated over governance at Toshiba, two
of the sources said. Toshiba has been dogged by accounting
issues and in January again revised its financial statements.
    Harvard's $41 billion endowment fund owns over 4% of Toshiba
and invests in Singapore-based activist hedge fund Effissimo
Capital Management, Toshiba's biggest shareholder with a 9.91%
stake, the sources said.
    Mizuno's initial approach was friendly but his dialogue with
Narvekar via emails and calls deteriorated on the weekend before
the meeting, as deadlines approached for overseas funds to
direct local custodians how to vote, two of the sources said.
    On one call, Mizuno raised the issue of foreign ownership
regulation, the four sources said, referring to a rule stating
foreign funds that together own 10% or more of a listed company
must declare when they intend to coordinate on voting.
    He focused on Harvard's relationship with Effissimo and the
vote for board candidates proposed by the hedge fund, two
sources said.
    Mizuno voiced the possibility of a regulatory investigation
should Harvard vote against the interests of Toshiba management,
four sources said. Harvard ultimately abstained, three said.
    Reuters could not determine whether Harvard and Effissimo
had agreed to coordinate voting. Effissimo declined to comment.
    
    COMPROMISED
    Opponents to Toshiba management have complained of perceived
governance lapses under Chief Executive Nobuaki Kurumatani, who
kept his job with 57% of the vote. That compared with 99% last
year in a country where CEOs usually get overwhelming support.
    Effissimo's three candidates were opposed by management and
failed to get elected, though one received 44% of the vote.
    Effissimo has since called for an extraordinary shareholder
meeting to establish a team of legal experts to investigate,
saying the voting rights of some shareholders were compromised.
 urn:newsml:reuters.com:*:nL1N2IX0CP  urn:newsml:reuters.com:*:nL4N2G903J

 (Reporting by Makiko Yamazaki; Additional reporting by Daniel
Leussink; Editing by David Dolan and Christopher Cushing)
 ((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))