After Toshiba president’s resignation, firm must proceed with transparency

The Yomiuri Shimbun

13:03 JST, April 17, 2022

The head of Toshiba, one of Japan’s most prestigious companies, has suddenly resigned. The company needs to settle the confusion under a new management setup and deal appropriately with a proposed buyout offer by an investment fund.

Toshiba Corp. announced that President and Chief Executive Officer Nobuaki Kurumatani resigned on April 14 and Chairman Satoshi Tsunakawa would serve concurrently as president.

The leadership reshuffle was triggered by a proposal from British investment fund CVC Capital Partners to acquire all of Toshiba’s shares and then delist them.

Toshiba has been at odds with another fund that is a major shareholder, over its management strategies and the way it dealt with fictitious transactions booked by a subsidiary that were brought to light in 2020. Delisting would have been favorable for Kurumatani, amid struggles to deal with “activist shareholders” who are pressing Toshiba to reform.

However, as Kurumatani served as chairman of CVC’s Japanese unit until March 2018, some inside and outside the company have questioned the transparency of the buyout offer. It is said that there were some attempts to dismiss Kurumatani, which apparently contributed to his resignation.

Kurumatani, a former vice president of Sumitomo Mitsui Banking Corp., was appointed as Toshiba’s chairman and CEO in April 2018 and became the president in April 2020. He is credited with restoring the company’s profitability through a strategy of “selection and concentration” of projects, and returning Toshiba to the First Section of the Tokyo Stock Exchange after it had been demoted to the Second Section.

However, there was opposition to some measures he implemented, such as thorough corporate downsizing. According to an internal survey, a majority of executives expressed no confidence in Kurumatani. The survey results are seen as a cause of the leadership reshuffle.

Toshiba’s management has been in turmoil since accounting irregularities came to light in 2015. In 2017, the company became insolvent due to huge losses in its nuclear power generation project in the United States. It increased its capital by ¥600 billion to make up for the losses. At that time, it received a lot of investment from activist shareholders.

The president at that time was Tsunakawa. First of all, he needs to work to restore ties with shareholders.

Meanwhile, CVC plans to make a detailed proposal soon. Other funds reportedly also will come forward with buyout offers, and there is a possibility of a bidding war among them. Toshiba must follow highly transparent procedures and carefully decide whether to accept an offer.

Toshiba has been involved in nuclear power businesses, including the decommissioning of nuclear reactors, defense-related businesses, and “quantum cryptographic communication,” which is theoretically impossible to wiretap or hack. It holds a 41% stake in semiconductor manufacturer Kioxia Holdings Corp., formerly Toshiba Memory Corp.

Toshiba’s business stability is important for Japan’s security. Acquisitions are subject to screening by the Foreign Exchange and Foreign Trade Law, which regulates foreign capital. The government must also keep an eye on the developments.

— The original Japanese article appeared in The Yomiuri Shimbun on April 17, 2021.