SINGAPORE, March 10, 2022–(BUSINESS WIRE)–Toshiba Corporation (“Toshiba”) has submitted Proposal No. 1, “Confirmation of Shareholder Views on Strategic Reorganization Review Process”, for consideration at the Extraordinary General Meeting meeting scheduled for March 24, 2022. The position of Effissimo Capital Management Pte Ltd (“Effissimo”, “we”, “our”) on this proposal is as follows.

1. Summary

• Toshiba’s proposed separation plan (“separation”) would mark a turning point both for Toshiba’s business value and for its future as a company, and would be irreversible – meaning that any errors in judgment here would have irrevocable consequences.

• The separation could ultimately hurt Toshiba’s business value in the medium to long term.

• Toshiba’s current management structure, including its Board of Directors (“Management Team”), is unable to develop such an irreversible and momentous plan and cannot be held responsible for the proper execution of such a plan. A trustworthy leadership team should be established, followed by a thorough review of the strategy under that team, and finally the leadership team that helped formulate it should be held accountable for its impact by leading its implementation of the strategy.

• In view of these circumstances, Effissimo has decided to vote against this Proposal. We hope that Toshiba will put an end to the current turmoil and put in place a management team in which its shareholders and other stakeholders will have confidence.

2. Detailed explanation.

The separation, if enacted, would have a profound impact on all stakeholders and would mark a turning point both for Toshiba’s corporate value and for its future as a company. As the Separation calls for a divestiture which would involve the sale of several businesses and the separation of Toshiba into two completely independent legal entities, the Separation would be irreversible – meaning that any errors in judgment here would have irrevocable consequences.

To vote in favor of the Separation, it would therefore be necessary to have the unshakable conviction that the Separation would lead to a medium and long-term increase in the value of the Toshiba company. However, we are deeply concerned that this is not the case given the circumstances surrounding the separation – which have been decidedly difficult, causing much anxiety among stakeholders – as well as given our analysis of the information currently available on the separation and the context that led to its deliberation. The separation could ultimately hurt Toshiba’s business value in the medium to long term.

The story continues

It is important to note that Toshiba’s management team suffers from a number of significant issues, including but not limited to the following.

First, trust still needs to be restored with shareholders and other stakeholders.¹

Second, it lacks sufficient management resources.²

Third, the people who should be held accountable for the future impact of the separation have resigned from their positions as leaders of the company.³

Fourth, the new CEO is serving on an interim basis and has not received a vote of confidence as a director from shareholders at a general meeting of shareholders.⁴

Fifth, the current composition of the board of directors is unprecedented in Japan: it does not include directors who also hold management positions at Toshiba.⁵

It is obvious, given the above, that Toshiba lacks the required management team here – a team capable of developing a strategic plan with such irreversible and profound consequences for the company, and which would hold all parties responsible with their associated responsibilities in order to properly execute such a plan.

What we have before us is a strategy with irreversible and profound consequences for the company, and which was formulated without Toshiba having first restored the confidence of all stakeholders, including shareholders. This strategic plan has yet to be approved at a general meeting of shareholders, and the people who formulated the strategy have since stepped down from their leadership positions, transferring responsibility for its execution to the new interim leaders, including the new CEO by interim.

As responsible shareholders for Toshiba’s future, we demand – at a minimum – that a management team be in place that is approved by its shareholders and other stakeholders, and that sufficient deliberations on strategy take place in a such structure. Then, once shareholders have approved the strategy, the board and management team that helped formulate it should take ownership and also lead its implementation. It’s the standard way a company should be run, and it’s the way these highly critical issues should play out as well.

In view of the above, we have decided to vote against Proposal 1. We believe that, given Toshiba’s current situation, no strategic plan should be approved that would have such an irreversible and profound impact on the Company as this separation. We hope that Toshiba will put an end to the current turmoil and put in place a management team in which its shareholders and other stakeholders will have confidence.

¹ Based on the recommendations of the governance improvement committee set up under the “pressure problem”, Toshiba says it will continue to make efforts to restore the confidence of shareholders and other stakeholders, which has been plagued by the problem. (“Notice Regarding Measures to Prevent Recurrences Based on Suggestions from the Governance Improvement Committee Investigation Report” dated December 16, 2021)
² Toshiba had originally planned to elect 13 directors at last year’s annual general meeting of shareholders, but the number of directors was reduced to 8 following the withdrawal or rejection of some candidates for election, as well than the resignation of a director. As a result, the number of directors remains below that deemed appropriate by Toshiba’s own corporate governance guidelines.
³ The company’s CEO and Senior Executive Vice President were both management representatives and directors playing a central role in shaping the proposed separation, and should be held accountable for the future impact of the separation on Toshiba, but both abruptly resigned from their management positions effective March 1. 2022.
⁴ New CEOs and COOs are still subject to performance review by the board and are said to be “interim” – a term articulated to mean that they will remain interim until it is confirmed. they work well enough to be suitable for the role of representative cadre officers.
⁵ As the two executive corporate officers have resigned from their executive functions, the current composition of the Board does not include directors who also exercise management functions, which means that there is no representation of the company’s management. within the council. This will remain the case for approximately four months from the current date until the Annual General Meeting.

See the source version on businesswire.com: https://www.businesswire.com/news/home/20220309006094/en/

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