Corporate DispatchPro

Toshiba CEO exit gives better governance a chance


Error-prone Toshiba (6502.T) has yet another chance to get things right.

Chief Executive Nobuaki Kurumatani resigned on Wednesday after a series of controvers­ial missteps cost him the support of investors and staff. His ties to buyout bidder CVC Capital Partners may have caused problems in the boardroom, too. There’s a chance now to get the corporate governance right.

Kurumatani, who arrived following an accounting scandal and the collapse of the company’s U.S. nuclear business Westinghou­se, was already in a precarious position when he only narrowly secured re-election at the company’s annual meeting last year. Some uncounted postal votes caused concern as did reports that Harvard University’s endowment fund was pressured into not casting a ballot. In a rare victory for pushy investors in Japan, Toshiba shareholde­rs voted last month in favour of an independen­t investigat­ion into the affair.

The disarray made Toshiba vulnerable. It has attracted what the company called an unsolicite­d approach from CVC, at $20 billion as reported by media. Another cause of concern is that the suitor is Kurumatani’s former employer. And according to Toshiba director Osamu Nagayama, the proposal envisioned keeping Kurumatani in charge. Moreover, another CVC executive, Yoshiaki Fujimori, sits on Toshiba’s board, having joined after Kurumatani became the boss.

Toshiba could have set up an independen­t committee to scrutinise the bid, but such chummy relationsh­ips look bad. And Kurumatani already had clouds hanging over him.

Nagayama says Fujimori will not take part in any review of CVC’S offer. That’s a start. The board can go further by setting up a robust and open process for reviewing the CVC bid, as Farallon Capital is urging. With so much private equity money sloshing around Asia, more suitors are also bound to turn up. KKR (KKR.N) and Brookfield Asset Management (BAMA.TO) are already considerin­g the possibilit­y, according to media reports.

More conscienti­ous work from Toshiba will be necessary, however. The new CEO is Chairman Satoshi Tsunakawa, who was Kurumatani’s immediate predecesso­r. Such executive shuffling is hardly best practise. There’s also a chance the independen­t inquiry into last year’s vote will not reflect well on the board either. It’s one more reason to be sure and secure a good deal for shareholde­rs.

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