Rebukes of corporate leaders in Japan are rare, but on Friday, shareholders of Toshiba - one of Japan's most important and most well-known tech giants - voted to oust Chairman of the Board Osamu Nagayama (along with a member of the board's audit committee) after an independent investigation uncovered that the company had wrongly colluded with other insiders to try and influence last year's board selection.
The vote comes just months after Toshiba investors backed Singapore-based hedge fund Effissimo Capital Management's call for a probe into the 2020 annual general meeting, in what was also considered a landmark vote.
Nagayama’s ouster is a "hugely shocking result for Japan’s business scene," according to Shin Ushijima, the president of Japan Corporate Governance Network.
According to Bloomberg, ahead of last year's AGM, Toshiba's management worked with Japanese public officials to improperly sway the vote. A 139-page report this month by three independent investigators elected by Toshiba's stock holders to explore the issue. Nagayama responded to the report by saying the board "sincerely accepted" the report's findings and would work to restore trust.
Corporate governance experts said the ouster sends a message to management at other Japanese firms.
“This AGM sent a clear signal to directors in Japan that shareholders will hold them accountable not just for attending meetings, but for running an effective board,” said Nicholas Benes, head of the nonprofit Board Director Training Institute of Japan. It’s “extremely rare” for director candidates backed by the company not to be elected in Japan, he said.
One analyst said the vote would help bolster trust in the company's management.
"This is a bullish outcome," said Travis Lundy, a special-situations analyst who publishes on Smartkarma. "Nagayama-san did not perpetrate the wrongdoing uncovered but the idea that the board chair has to be responsible for committee failures is key, and the fact that shareholders made sure he was responsible is very important. It shows that shareholders matter."
The big question now is whether the assertiveness exhibited by shareholders of Toshiba, a majority of whom are foreigners, will be mirrored by shareholders of other Japanese firms. Japanese firms "should take this as a wake-up call and realize what shareholders are capable of doing," said Atsushi Osanai, a professor at the prestigious Waseda University in Tokyo.