The Toshiba inflammatory report may finally change the Japanese company


Over the past 17 weeks, Japan’s spectacular success on Sunday evening has dramatized the life of Eiichi Shibusawa – face of the new Y10,000 note and “father of Japanese capitalism”. The show has months to go, but we already know how it ends: Japan emerging from the 19th century with a unique, ethically and socially superior brand of stakeholder capitalism whose qualities resonate powerfully today.

It’s a welcome myth, which Toshiba, because of its epic machinations with the government to suppress shareholders ’rights, may have just pulverized.

Perhaps the most thorny challenge in the Report of 147 pages on Toshiba released last week by an independent panel of investigators looking at last year’s annual shareholders ’meeting, working on what’s to come. The choice includes the management of Toshiba, the Ministry of Economy, Trade and Industry (METI), the former head superstar of Japan Pension Fund investment $ 1.6 billion Hiromichi Mizuno, potentially Prime Minister Yoshihide Suga and, critically, the global image of Japan as an investment destination. Nobuaki Kurumatani, who resigns as chief executive of Toshiba of April, probably the edge.

Beyond that, the really awkward question is whether the last six years of slogan and apparent reform, during which Japan has sought to convince the world of its commitment to governance and governance, have been the pretense that the pessimists have always feared that it would be under the superficial signs of progress.

The evil-rich document evoked a collaboration between the government and Toshiba management in which both parties appear to see vocal action and activism as an enemy. Toshiba’s AGA 2020, he concludes, was not managed enough. The collusion was focused on supporting particularly large shareholders to shift their opposition to an AGM vote leading to the coup on which Kurumatani’s survival depends. An executive, he alleges, has asked the trade minister to “beat” the big activist shareholders on his behalf. Another highlighted the way in which foreign funds were “scared” by the Japanese authorities and implied that this could be armed against them.

The report suggests that some METI officials believed that leverage on foreign activists was available through the Foreign Exchange and Foreign Trade Act – a law that revised in 2019 the FT warned could have that effect. A next one letter to the FT by 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 forced it into business, is damaging in a way that Japanese reports rarely are: dishonesty, subterfuge and hypocrisy emerge as the culprit where they are normally blamed. incompetence, group thinking and hierarchical structures no doubt. In an unprecedented move, four Toshiba board members issued a statement describing the report as “surprising, disappointing and, in some areas, deeply disturbing.”

As the four have pointed out, the detailed exposition of the malfeasance report makes a particularly painful contrast to Toshiba’s original internal investigation into the matter – a bleaching that was done to look like a masterclass in the sidelining of the company. shareholders ’interests and contempt for corporate governance.

For all that, the report is a document whose radius of impact depends on the observer. For those who see their findings specific to an extraordinary company situation, and who already thought Toshiba was an irredeemable governance horror story, the air is dense with smoking guns. To those who have long suspected that METI is predisposed to interference and even conspiracy, it does little to allay concerns that the ministry is acting in the same way as other Japanese companies if it feels the need. It is not hard to imagine Carlos Ghosn, who has already alleged that METI is one of the conspirators rushing his 2018 arrest, using this report to fortify this conviction.

But once again the strong temptation is to see the whole thing as revealing a broader truth: that the fundamental attitudes of corporate Japan, and the government officials most directly engaged with it, are in a great way. number of cases changed only minimally in the direction of greater care for shareholders.

This conclusion, despite all its negativity, may ultimately be a useful thing if, as one of Toshiba’s largest shareholders said, the report and its inflammatory nature now become the catalyst for real change. The risk surrounding Toshiba’s long line of misery, which began with an accounting scandal in 2015 and brought the company to the brink of collapse a few years later, has always been that it would be treated as an outlier. visually rather than as sitting the same spectrum of poor governance as a large part of corporate Japan.

leo.lewis@ft.com



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