Nominees to Toshiba Corp’s (6502.T) board backed by activist fund Effissimo Capital Management said they plan to talk with investors in a push to convince them that additional directors will help the industrial conglomerate fix compliance issues.
The move comes after Institutional Shareholder Services Inc (ISS) and Glass, Lewis & Co decided last week not to side with a proposal by Effissimo, Toshiba’s biggest shareholder, to add three directors, arguing that the current management team is relatively new and diverse.
Calling the decision by proxy advisers a surprise, nominees Tadaaki Sugiyama, a former Kao Corp (4452.T) executive and Akira Takeuchi, an attorney, told Reuters they planned to make a more compelling case and have more thorough discussions with Toshiba shareholders.
They also plan to argue their case again with the proxy advisers.
“If we communicate better with investors and fill in the gaps where our message has not yet gotten across then I do think it’s quite possible that shareholders will vote opposite to ISS recommendations,” Sugiyama said in an interview.
Effissimo, a Singapore-based fund with a 15% stake, is citing fictitious transactions Toshiba disclosed this year as evidence that its corporate governance has not made significant progress since a major accounting scandal in 2015.
Toshiba has opposed the move, arguing that 12 board members is sufficient and that one nominee, an Effissimo co-founder, is inappropriate, citing conflicts of interest.
While still reeling from the accounting scandal, Toshiba was then plunged into crisis stemming from the failure of its U.S. nuclear power unit in 2017, prompting it to sell $5.6 billion of stock to dozens of foreign hedge funds.
Foreign shareholders now hold 63% of Toshiba’s voting rights while Effissimo and other activist funds hold about 30%. Toshiba added seven independent directors last year at the urging of U.S. hedge fund King Street Capital.
Toshiba’s annual meeting is scheduled for July 31.