Japan seeing rise of shareholder activism

On Thursday, Toshiba Corp shareholders voted in favor of an independent investigation into allegations of investors being pressured ahead of last year’s annual general meeting. The development could potentially spur more shareholder activism.

This is the fourth time a shareholder motion has won approval in Japan and a first for a major company that is a household name.

In the previous AGM, a few Toshiba shareholders had felt pressured to vote in line with management’s wishes on director nominations, said sources.

“This result shines a very public spotlight on the likelihood that EGMs, which in Japan can be called by a shareholder that has owned only 3% for 6 months, will probably be used more by activists,” said Nicholas Benes, an expert in corporate governance and a representative director of the Board Director Training Institute of Japan.

The proposal from Effissimo Capital Management, an activist investor and Toshiba’s biggest shareholder, was backed by proxy advisers and required a simple majority of votes on Thursday’s extraordinary general meeting to pass. A breakup of the voting results was not immediately disclosed.

There were earlier news reports that a Harvard University endowment fund had been told by a Japanese government adviser that it could be subject to a regulatory probe if it did not follow management’s recommendations in the previous AGM. The fund had abstained from voting and later learnt that there was no basis for any probe, said sources.

According to sources familiar with the matter at hand, Japan’s trade ministry had also got in touch with several foreign shareholders ahead of the AGM.

An internal investigation conducted by Toshiba found, it was not involved in any effort to pressure the Harvard fund in last year’s AGM. However, its probe had faced criticism as being perfunctory and insufficient. A second proposal from U.S. hedge fund Farallon Capital Management, Toshiba’s second largest shareholder, that sought changes to the conglomerate’s capital policy did not receive sufficient shareholder backing to pass.

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