Over the past 17 weeks, the hit Japanese Sunday night show has dramatized the life of Eiichi Shibusawa, face of the new 10,000 Y note and “father of Japanese capitalism.” The show still 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 actor capitalism whose qualities resonate powerfully today.
It’s a cozy mythology, which Toshiba, through its epic machinations with the government to suppress shareholder rights, may have just pulverized.
Perhaps the thorniest challenge of the 147-page report on Toshiba released last week by an independent investigative group tasked with reviewing last year’s annual meeting of shareholders, determines who is doing the worst. The pick includes Toshiba management, the Ministry of Economy, Trade and Industry (METI), former superstar investment chief of the $ 1.6 billion Japanese pension fund Hiromichi Mizuno, potentially Prime Minister Yoshihide Suga and, above all, Japan’s global image as an investment destination. Nobuaki Kurumatani, who resigned as CEO of Toshiba in April, it probably borders.
Beyond that, the really tricky question is whether the past six years of slogans and apparent reforms, in which Japan has sought to convince the world of its commitment to governance and stewardship, have been the sham pessimists have always feared under the superficial signs of progress.
The villainous document eviscerates a collaboration between the government and Toshiba management in which both sides appear to view boisterous, militant shareholders as an enemy. Toshiba’s 2020 AGM, he concludes, was not organized properly. The collusion was intended to rely on particularly important shareholders to change their opposition to a sharp AGM vote on which Kurumatani’s survival depended. One leader, he says, called on the Commerce Ministry to “beat up” large activist shareholders on his behalf. Another pointed to how foreign funds were “afraid” of the Japanese authorities and hinted that it could be used as a weapon against them.
The report suggests that some METI officials believed influence over foreign activists was available through the Foreign Exchange and Foreign Trade Law – a law revised in 2019 FT warned could have this effect. A suite letter to FT Deputy Finance Minister for International Affairs reassured readers that activists are urged to engage with Japanese companies to increase the value of the company.
The investigation, which only took place because shareholders forced it on the company, is damning in a way that Japanese reports rarely are: dishonesty, subterfuge and hypocrisy appear to be the culprits. where normally incompetence, group thinking and unconditional hierarchical structures are blamed. In an unprecedented move, four members of Toshiba’s board of directors issued a statement describing the report as “surprising, disappointing and, in some areas, deeply disturbing.”
As the four noted, the detailed exposure of wrongdoing in the report makes a particularly painful contrast to Toshiba’s initial internal investigation into the matter – a laundering that was done to look like a master class in the field. sidelining shareholder interests and contempt for corporate governance.
For all this, the report is a document whose blast radius depends on the viewer. For those who see his findings as specific to an extraordinary corporate situation, and who already thought Toshiba was some irremediable governance horror story, the air is thick with smoldering weapons. For those who have long suspected that the METI is predisposed to meddling and even conspiracy, that does little to allay fears that the ministry will do the same with other Japanese companies if it does. felt the need. It’s not hard to imagine Carlos Ghosn, who has long claimed that the METI was among the conspirators who precipitated his arrest in 2018, using this report to reinforce that belief.
But again, there is a strong temptation to see the whole affair as revealing a larger truth: that the basic attitudes of Japanese companies and the government officials most directly involved in this affair do, in many cases. , that very little moved in the direction of greater attention to shareholders.
This conclusion, for all its negativity, may ultimately be helpful if, as one of Toshiba’s biggest shareholders put it, the report and its inflammatory nature now become the catalyst for real change. The risk around 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, has always been that it would be treated as an outlier. rather than sitting on the same specter of bad governance as most Japanese companies.
