Toshiba invites foreigners to strut their stuff as Japan rethinks corporate governance

Source:Global Times Published: 2019/5/16 20:33:27

Toshiba is back at the vanguard. The embattled $18 billion conglomerate led the way in Japan on everything from radar to laptop computers. Now it has nominated four non-Japanese directors for an expanded and more independent board. It's a bold step in a country slowly rethinking corporate governance. Given previous failed experiments with outsiders, the company's experience will be a litmus test.

The shakeup can be attributed to a group of funds that have been agitating for changes. Toshiba specifically thanked its three largest shareholders - Effissimo Capital Management, Farallon Capital Management and King Street Capital Management - for their "expertise and thoughtful participation" on the board's composition. Bowing to pushy investors has become more common in Japan: Olympus and bathroom fixtures maker Lixil have done so, too. Opening up to non-Japanese voices is rare, though.

There were only 80 foreign directors at Nikkei 225 companies last year, amounting to about 3 percent of the total, according to executive recruitment firm Spencer Stuart. And only 34 of them were outsiders and considered independent. By comparison, in Germany, France and Britain, at least a quarter of board members are foreign nationals.

It is a symptom of the insularity of Japanese companies, which has been a serious impediment to making strategic and financial improvements. There also have been some high-profile exceptions, debacles even in the rare instances when foreign influence has been allowed. Nissan Motor is grappling with a scandal involving longtime boss Carlos Ghosn. Howard Stringer's tenure at Sony was blighted by, among other things, a collapse in the stock price.

Toshiba's new board members, if approved, will be in the spotlight. CEO Nobuaki Kurumatani's recently announced five-year turnaround plan, which includes shrinking the workforce and exiting some businesses, has just begun. Rubber-stamping it would hardly justify all the upheaval. 

The new international members - which include restructuring specialist Paul Brough, who helped liquidate Lehman Brothers' Asian assets and took over ailing commodities trader Noble Group in May 2017 - may have some ideas of their own. How Toshiba handles the guidance, and fares under it, is bound to determine future foreign experimentation in Japan Inc.

The author is Jeffrey Goldfarb, a Reuters Breakingviews columnist. The article was first published on Reuters Breakingviews.

Posted in: INSIDER'S EYE

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