Toshiba director resigns warning of more instability at company

Shareholders in Toshiba have prolonged “instability and uncertainty” at the troubled conglomerate with their shock vote to remove the chair of the company’s board, said a director who saw no choice but to resign following last Friday’s investor revolt.

In exclusive remarks made to the Financial Times following his sudden resignation on Friday, George Olcott expressed strong misgivings about the vote to oust Osamu Nagayama — a man he described as one of the few Japanese business leaders able to oversee a turnround on the scale now required by Toshiba.

“Removing him as chair only serves to prolong instability and uncertainty in addition to depriving the board of an outstanding leader. I cannot understand how this development represents a good outcome for the company or any of its stakeholders,” said Olcott, a former investment banker at SG Warburg who sits on the boards of several Japanese companies.

His remarks follow Toshiba’s annual general meeting (AGM) last Friday — held after months of deepening turmoil for the company and a period of unprecedented victories for shareholder activists operating in Japan.

Nagayama’s removal by shareholders at the AGM followed calls by some investors for the entire board to be removed as a consequence of repeated leadership failures at a company that many see as rich with valuable technology and growth potential.

“I believe that Mr Nagayama’s plan to plot a new course for Toshiba to improve its corporate value was ambitious, but realisable and I was looking forward to helping him and the board in this endeavour,” said Olcott.

But others strongly rejected Olcott’s warning of instability at Toshiba, asserting instead that, despite the messiness of the process, the past two weeks had removed the main lightning rods of shareholder mistrust of Toshiba’s leadership.

Raymond Zage, a non-executive director of Toshiba said the immediate aftermath of last Friday’s AGM had put the board in a state of unity and clarity on the issues in need of attention.

“The root cause of instability at Toshiba is the result of a loss of trust from our shareholders, and the independent investigation confirmed that this loss of trust was warranted. We are fully focused on the need to restore this trust and also the importance of providing stability and certainty for our employees and customers,” Zage told the FT.

Friday’s removal of Nagayama forces the company’s interim CEO, Satoshi Tsunakawa, to step in as interim board chair until Toshiba can convene an extraordinary general meeting to appoint a new leadership team that includes at least four new non-executive board members.

The AGM followed the release this month of an explosive independent report into the events surrounding Toshiba’s 2020 annual meeting. The report alleged collusion between the company and Japan’s government to suppress activist shareholders.

In the days leading up to last Friday’s AGM, an increasing number of large institutional shareholders told the FT they could not justify voting for Nagayama’s reappointment.

While Nagayama took his roles as board chair and head of the nomination committee after the 2020 AGM, they argued he should be held responsible for the handling of Toshiba’s own investigation, which concluded there were no problems. 

But other figures have also waded into the debate in his defence, including John Roos, Barack Obama’s former ambassador to Tokyo, who released a statement ahead of the AGM praising Nagayama as “an agent of positive change, not a protector of the status quo.” 

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