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Toshiba’s flaming report may finally change Japan’s company


Over the past 17 weeks, the successful Japanese Sunday Night Show has portrayed the life of Eichi Shibusawa – the face of the new 10,000 yen banknote and “the father of Japanese capitalism”. The fair still has months ahead, but we already know how it will end: Japan emerged from the nineteenth century with a unique, morally and socially superior brand of stakeholder capitalism that resonates so powerfully today.

It’s a warm myth that Toshiba, through its epic machinations with the government to suppress shareholder rights, may have just destroyed it.

Perhaps the thorny challenge in 147 page report On Toshiba published last week by an independent panel of investigators looking at the annual meeting of shareholders last year, is working to determine who comes worst. The selection includes the Toshiba administration, the Ministry of Economy, Trade and Industry (METI), the prominent former investment chief of Japan’s $1.6 trillion pension fund Hiromichi Mizuno, potential Prime Minister Yoshihide Suga, and most importantly, Japan’s global image as an investment destination. Nobuaki Kurumatani, from Resigned as CEO of Toshiba In April, maybe its edges.

Moreover, the truly awkward question is whether the past six years of seeming slogans and reform, during which Japan has sought to convince the world of its commitment to governance and oversight, is the delusion that pessimists have always feared was under the superficial signs. of progress.

The villain-rich document strips away cooperation between the government and Toshiba’s management as both parties seem to view the activist and activist contributors as enemies. It concluded that the 2020 Ordinary General Assembly held by Toshiba was not fairly managed. The collusion focused on relying on certain major shareholders to alter their opposition to the AGM vote upon which Kurumatani’s survival depended. She alleges that an executive called on the Commerce Department to “hit” large active shareholders on its behalf. Another highlighted the way foreign money was “afraid” of the Japanese authorities and hinted that this could be used as a weapon against them.

The report notes that some METI officials believed that leverage over foreign activists was available through the Foreign Exchange and Foreign Trade Act – a law revised in 2019 Financial Times warned It can have this effect. suffix Message to FT The Deputy Minister of Finance for International Affairs reassured readers that activists are welcome to engage with Japanese companies to increase the value of the company.

The investigation, which happened only because shareholders imposed it on the company, is owed in a way Japanese reports rarely do: lies, trickery and hypocrisy appear as culprits where incompetence, groupthink and unquestioned hierarchical structures are usually blamed. In an unprecedented move, four Toshiba board members released a statement calling the report “surprising, disappointing and, in some areas, deeply disturbing.”

As the four note, the detailed disclosure of wrongdoing in the report stands in a particularly painful contrast to Toshiba’s original internal investigation into the matter — a whitewash that was made to appear as a major layer in the marginalization of shareholder interests and contempt for corporate governance.

For all this, the report is a document whose radius of explosion depends on the beholder. For those who see its results as specific to the case of one exceptional company, and who already thought Toshiba was an irreparable governance horror story, the air is awash in firearms. For those who have long suspected that METI is poised to interfere and even plot, it does little to allay fears that the ministry will reciprocate with other Japanese companies if it feels the need. It’s not hard to imagine Carlos Ghosn, who has long claimed that the METI movement was among the conspirators who precipitated his 2018 arrest, using this report to fortify this conviction.

But again, the strong temptation is to view the whole affair as revealing a broader truth: that the basic positions of Japanese companies, and the government officials who deal with them directly, have in many cases regressed only slightly in a larger direction. Shareholder care.

That conclusion, for all its negativity, might ultimately be something useful, said one of Toshiba’s largest shareholders, if the report and its fiery nature now become a catalyst for real change. The risks surrounding Toshiba’s long period of misery, which began with an accounting scandal in 2015 and brought the company to the brink of collapse a few years later, were always that it would be treated as an anomaly eye-popping rather than sitting. The same shoddy management spectrum as a lot of Japanese companies.

leo.lewis@ft.com



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