Osamu Nagayama's fall comes amid criticism that the conglomerate colluded with government officials against overseas investors.

Japanese conglomerate Toshiba has been hit by a series corporate governance issues in recent years.
Japanese conglomerate Toshiba has been hit by a series corporate governance issues in recent years. (AP)

Foreign investors had their day in Japan as they succeeded in ousting Chairman of Toshiba, one of the oldest business conglomerates that makes multiple products ranging from power generators to computer hard drives. 

Osamu Nagayama, the 74-year-old director, could not get enough votes for a re-election at the company's annual general meeting (AGM) of the shareholders on Friday. 

His exit comes as Toshiba's management faces criticism for colluding with government in pushing back against overseas investors who own almost two-thirds of Toshiba's stock. 

The move against the board chair is particularly significant as management in Japanese companies usually holds unquestionable sway. 

Battered Toshiba has faced questions related to its corporate governance practice in the past especially after it emerged that former executives inflated profits to the tune of $1.3 billion between 2009 and 2014. 

After the AGM that lasted nearly three hours, Tokyo-based Toshiba failed to win shareholder approval for the reappointment of Nagayama and one other member of the board of directors. The other nine candidates were approved.

Nagayama had come under pressure to resign after an independent investigation that said Toshiba officials colluded with the Japanese government to curb foreign investors’ influence at last year's shareholder meeting.

Major shareholders such as Singapore-based investment fund Effissimo instigated that investigation, alleging that last year’s meeting, in which Effissimo had nominated dissident directors, wasn’t carried out fairly. They demanded Nagayama's ouster at Friday’s meeting.

“He bears the greatest responsibility in nominating candidates and has ultimate responsibility for the conduct of the board,” Effissimo said in a report earlier this month.

Besides Effissimo, which owns about 10 percent of Toshiba shares, other foreign investors include 3D Investment Partners and Harvard University’s endowment fund.

The investigation included hearings with Toshiba employees, and going over 800,000 emails, to see whether the vote tally had been dubious and Trade Ministry bureaucrats had pressured investors on how to vote.

The roiling at Toshiba highlights the bigger presence of foreign shareholders at Japanese companies.

Toshiba has promised to scrutinise the allegations and take necessary measures.

Nagayama is well respected in the corporate world, having turned around the fortune of Sony. 

Toshiba began to face trouble over its heavy investment in nuclear power, although that move had been initially heralded. 

After the March 2011 nuclear disaster in Fukushima, safety costs ballooned. Toshiba is still burdened with the task of decommissioning nuclear plants in Japan, including the one in Fukushima.

Toshiba also had massive losses from the nuclear power operations of US manufacturer Westinghouse, which Toshiba acquired in 2006. Westinghouse filed for bankruptcy protection in 2017.

Founded in 1875, Toshiba was long one of Japan’s prized brands, developing the nation’s first radar and microwaves, electric rice cookers and laptop computers.

It also invented flash memory, the chips ubiquitous in gadgets from digital cameras to cell phones. Toshiba sold its chips division in 2018, a move that accelerated the presence of more vocal stakeholders.

Source: AP