Toshiba to introduce confidence vote
As part of management reforms, Toshiba Corp. will introduce a new system under which senior managers will participate in an annual vote of confidence on the president.
The envisaged confidence vote system aims to fix Toshiba’s “corporate culture in which one could not go against the boss’s will” — a factor that is believed to have led to improper accounting practices at the electronics giant.
It is unusual for a major company to institute such a system. Whether Toshiba will be able to ensure the effectiveness of the system will be key.
confidence vote on the president, which will be held in November every year, will seek the mandate of about 120 senior managers, including executive officers, business department chiefs and branch managers, but exclude directors.
In the confidence vote, the senior managers will be asked to select one of the three choices: “Confident,” “Not confident” or “Unsure.” If more than about 20 percent choose “Not confident,” an additional survey will be conducted to find out why confidence is not held in the president.
The result of the confidence vote will be passed only to the company’s nomination commit- tee, which is in charge of selecting candidates for directorships. The committee will then discuss the outcome of the vote and make a proposal to the board of directors on whether the president should be reappointed.
If support is low in the confidence vote, it is highly likely that reappointment of the president will not be permitted even if he or she wants to keep the presidency.
The first confidence vote will be held on President Masashi Muromachi.
A similar vote system is used by some smaller firms in the country.
a stone material trading company in Osaka Prefecture, introduced a system in 1993 under which employees vote to select candidates for directorships, including the president. The vote is held every two years. Most of the firms’ over 100 employees hold company shares and have voting rights. Selected candidates formally assume their post if they are approved at a shareholders meeting.
Lawyer Shin Ushijima, who is well versed in corporate governance, says an increased say for mid-career managers is effective in strengthening internal control.
In Europe, there are also systems that reflect employees’ opinions in the appointment of company presidents and other executives. In Germany, major companies are obliged to have employees other than senior managers on their boards of auditors, which are authorized to appoint directors.
However, confidence votes can be abused where there is factional strife. Commenting on Toshiba’s planned confidence vote system, professor Shosaku Masai of Tokoha University, who specializes in corporate management systems used overseas, says, “Even though it is an anonymous vote, it is necessary to operate the system carefully to ensure voters’ independence.”