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Toshiba to flag that activist board nominees were not approved unanimously

Toshiba to flag that activist board nominees were not approved unanimously

People familiar with the case said on Friday that Toshiba Corp plans to notify shareholders that two board director nominees from activist hedge funds were not unanimously approved by its nomination committee.

While split votes on director nominees are not uncommon, formally disclosing the subject highlights how thorny the topic has been for Toshiba’s board of directors.

The beleaguered company intends to include a remark on the split vote in a booklet for its annual shareholders’ meeting on June 28, according to two individuals who declined to be identified because the topic is private.

Director Mariko Watahiki had objected to the nominations of Nabeel Bhanji, a senior portfolio manager at Elliott Management, and Eijiro Imai, managing director at Farallon Capital Management, according to Jerry Black, an external director on the five-member nomination committee.

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Watahiki, a former high court judge, also wanted to be on the record as opposing the two candidates, according to Black. He didn’t say why she was against the nominees.

According to one of the individuals, Watahiki suggested that the nominees’ backgrounds could skew the board’s balance.

Watahiki could not be reached for comment.

Toshiba has been at odds with its activist shareholder base since 2015 when it was caught up in accounting and governance scandals. Some of those shareholders, notably Farallon, have advocated for the company to be turned private, claiming that this is the best way to maximize shareholder value and address governance issues.

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Toshiba has been reviewing its strategic options after shareholders rejected a restructuring plan, and the board director appointments are one piece of evidence that the company has become more receptive to the possibility of a take-private deal.

Toshiba announced on Thursday that it has received eight preliminary proposals to take the company private, as well as two proposals for capital alliances that would allow it to remain publicly traded.

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Bringing activist shareholders onto a board of directors is uncommon in Japan, though there have been a few instances, such as Olympus Corp’s decision in 2019 to welcome a ValueAct Capital partner onto its board of directors.

Toshiba has also proposed Akihiro Watanabe, an executive from boutique U.S. investment bank Houlihan Lokey, as chairman of its board of directors, in addition to Bhanji and Imai.

Toshiba’s board of directors now comprises eight members, but the corporation aims to expand to 13.

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