Toshiba to in­tro­duce con­fi­dence vote

The China Post - - BUSINESS -

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.

The anony­mous

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.

Ja­pan

Stone

Cen­ter

Co.,

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.”

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