BUSINESS CASE ANALYSIS

Give a short background of the company/ies

HISASHIGE TANAKA –“Edison of Japan”

(1) 1875- Tanaka Seizo-sha --- telegraph equipment, transformer and electric motors

Shibaura Seisakusho Works

(2) 1890- Hakunetsusha & Co --- incandescent lamp, light bulb, radio receiver, and cathode ray tube

1899- Tokyo Electric Company

The merging of individual entities

(3) 1939- Tokyo Shibaura Electric Company

1978- Toshiba Corporation-microwave ovens and word processors

What was/were the main issue/s?

1. Mismanagement of the AGM (annual general stockholders meeting)

 Sabotage personnel [METI] on the vote counting to retain local director nominees and joint
ignorance on the concerns of their stockholders.
 Foreign investors help raise the amount of $5.4 billion after the accounting scandals and issues
with Toshiba enables these foreign investors to compose a total of 62.62% of voting rights which
could have a great imoact on the voter turnout
- Effisimo Capital Management (Singapore)- 15.46%
- 3D Investment Partners (Singapore)- 4.13%
- Harvard Management Company, Inc. (US)- 4.43%

Statements from the case:

1. “The investigation committee found that Toshiba in unison with METI devised a plan to
prevent Effisimo from exercising its shareholder's proposal right at the AGM devised a
plan to unfairly influence the content of 3D’s exercise of its voting rights and effectively
asked [a METI official] to negotiate with HMC [Harvard Management Company, Inc.] to
change its voting behavior to include the option of not exercising any of its voting rights”
2. 1,139 voting forms that were alleged to have been submitted on the day before the
meeting
3. Pressure on institutional shareholders before the meeting
 4. In contrast, “The head of METI also rejected shareholders concerns of the putative
governmental overreach and indicated that ‘the ministry did the right’”
5. The non-practice of the principles specifically on the importance of shareholder's right
(the right to vote)

2. Management attempted to limit directors from local nominees and avoided foreign director
nominees

 Saw foreign investments and management as a threat to the Japanese management.

- The investigation report claimed that Toshiba had gotten the help of METI to invoke newly
amended regulations regarding foreign investment in sensitive industries as a threat to
focus the company's recalcitrant foreign investors to withdraw their director nominees.
 Does not uphold to a feature of the new corporate governance;
- most specifically … Selected feature: Independent directors to have managerial skills
from other companies (nominating committee model of corporate governance)

Statements from the case:

1. Violated “the importance of maintaining a regular, constructive dialogue with all the
shareholders”
2. Good cop/ bad cop strategy – ministry would beat up Effisimo and then Toshiba would offer a
compromise.
3. Toshiba's apology letter stating hiring a firm to solicit shareholder opinion on several issues
and implementing a strong compliance culture

FOCUS:

 Did not accept change in the management that better conforms to the growing concern of
globalization

How was/were the issue/s resolved?

- Internal investigation supports the management so the issues were resolved through the
earnest investigation of the key institutional shareholders led by Effisimo and the deployment of
the three-person independent investigation team
- Interview officers both internal and external
- Digital forensic examination of emails
- Whistleblower hotline and identified errors in the counting system
What more could have been done to improve the company's performance and financial position?

 Open to changes and hear the opinion of shareholders to be deliberated upon to keep the
company health