Toshiba Corp shareholders approved the firm's proposal to invite representatives from two foreign activist funds onto its board, a move which may help speed the transition of the troubled industrial conglomerate.
Earlier this year, Toshiba decided to put itself up for auction and so far has received eight offers to take the company private and two proposals for minority investment.
Toshiba is aiming at improving its relationship with foreign shareholders by appointing new directors from major U.S.-based shareholders Elliott Management Corp. and Farallon Capital Management LLC.
The appointments of Nabeel Bhanji, senior portfolio manager of Elliott Investment Management, and Eijiro Imai, managing director at Farallon Capital Japan, mean that nearly half of Toshiba’s board has ties with a small group of major foreign shareholders.
At the meeting, some shareholders expressed concerns that the appointments might threaten the independence of the board, while others said they didn’t like the prospect of privatization because the company has national security ties, including with its nuclear power business.
“We will continue to consider every option and try to come up with a decision which shareholders can agree to,” said Chief Executive Taro Shimada.
Toshiba is now working to narrow down the bidders to a handful, who would then do more due diligence and offer legally binding bids. Mr. Shimada said in a recent interview that he wanted any buyer to keep the company in one piece to promote innovation.
Later, an outside director who had dissented on the nominations stepped down. Mariko Watahiki, a former judge, had said they would be unfair to other shareholders without such representation.
U.S. proxy advisory firm Glass Lewis & Co. said Messrs. Bhanji and Imai would help pave the way for the company’s restructuring.
The appointments “were expected to reflect a negotiated turning point for Toshiba, with the company embracing external, shareholder-centric perspectives contemporaneous with the ongoing evaluation of a raft of prospective bids for the firm,” Glass Lewis said in a recommendation issued for the meeting.
Toshiba has been facing pressure from foreign shareholders, who own about half the firm after they injected capital in 2017. The relationship worsened after a report released in June 2021 found evidence of broad collaboration between the Japanese government and the company to prevent foreign shareholders from exercising their rights.
Toshiba shareholders also approved the management’s proposal to appoint Akihiro Watanabe, chairman of Asia corporate finance at U.S. investment bank Houlihan Lokey, as the new chairman of its board.
Hiroshi Sukegawa, a former Toshiba engineer, attended the shareholder meeting and said he was voting against the appointments of Messrs. Bhanji and Imai.
“It is not a good power balance for people who will eventually exit to be able to make choices which Toshiba is supposed to make on its own, such as the price” for any deals, Mr. Sukegawa said. “It is very one-sided.”