Pivotal Toshiba shareholder vote on future of board chairman begins By Reuters

By Makiko Yamazaki

TOKYO (Reuters) – Toshiba (OTC:) Corp kicked off its annual general meeting on Friday, with shareholders set to decide on whether to keep Osamu Nagayama as board chairman. The vote – expected to be very close – is seen by many as a referendum on corporate governance in Japan.

Nagayama has been under immense pressure to resign after an independent investigation this month accused the industrial conglomerate of colluding with Japan’s trade ministry to block foreign shareholders from gaining influence on the board at last year’s AGM.

Nagayama’s critics say he should take responsibility for the board’s resistance to a shareholder’s call for an independent probe.

3D Investment Partners, Toshiba’s No. 2 shareholder with a 7.2% stake, has called for his immediate resignation, while shareholder advisory firms Institutional Shareholder Services Inc and Glass Lewis have recommended shareholders not reappoint him.

If he is voted out, it would mark another watershed moment for Japan’s corporate governance after foreign activist investors prevailed at a March extraordinary general meeting in their efforts to secure the probe into the allegations.

But Nagayama’s supporters argue he only joined Toshiba’s board after the alleged pressuring of foreign shareholders took place and that Toshiba, which has lurched from crisis to crisis since 2015, needs his experience.

Nagayama, a former Chugai Pharmaceutical CEO and Sony (NYSE:) Group Corp board director, is expected to win the backing of many domestic investors.

They now make up a greater proportion of Toshiba’s shareholder base after the conglomerate’s reinstatement in the Tokyo Stock Exchange’s index this year brought in more index-linked funds. Since then, the proportion of foreign investors in Toshiba has fallen to around half from 63% a year ago, according to the company.

Toshiba will nominate 11 directors at the AGM, including Nagayama. Two members of the board’s audit committee, which has been blamed for failing to properly address the allegations levelled at management, are not standing for re-election.

Voting records disclosed so far show that Norges Bank Investment Management, the world’s largest sovereign wealth fund, and the State Board of Administration of Florida have voted against Nagayama.

But the California Public Employees’ Retirement System (CalPERS) has voted for Nagayama. BlackRock Inc (NYSE:), which has a large stake of more than 5%, also voted for him, a person familiar with the matter has said.