[Speaking Out] Toshiba: Don’t mix national security issues with corporate governance


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The report of an external investigation into Toshiba Corporation recently came out, concluding that the company unfairly handled its general meeting of shareholders last year. As requested by Toshiba, the Japanese Ministry of Economy, Trade and Industry took advantage of the Foreign Exchange and Trade Control Law to intervene on behalf of management to block proposals from militant shareholders. , according to a report by a group of lawyers.

However, we should not be misled by media reports taking the investigation report for granted, but view the realities with calm.

The investigation was carried out by lawyers chosen by militant shareholders. Thus, lawyers cannot be considered as objective third parties. The investigation report says investigators only made one-sided speculations based on massive Toshiba email data without verifying the facts.

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Concerns over technology leak to China

Some critics say METI should be held responsible for the details of the incident. METI Minister Hiroshi Kajiyama categorically denied the ministry’s intervention at Toshiba’s general meeting of shareholders, and noted that he had taken the necessary steps to secure key companies and technologies from the point of view national security. He did not give more details.

From an international perspective, it is natural to refrain from explaining the details of national security matters. Explaining the details of examinations under the Foreign Trade and Exchange Control Act is like showing the government’s national security cards. To criticize the absence of such an explanation as being opaque is to denounce a lack of conventional wisdom in matters of national security.

In the Toshiba case, the published documents alone provide an indication of national security concerns. A documented shareholder proposal linked to last year’s Toshiba shareholders’ meeting called for a former outside director of Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract semiconductor producer which is subject to a US export embargo due to national security concerns, be appointed as Toshiba’s external director.

It’s odd to suggest that METI shouldn’t check out concerns about tech leaks. It is natural for METI to ask Toshiba for background information on activist shareholders and details of outside director appointments.

The revised Foreign Exchange and Foreign Trade Law allows the government, in cases of key industries related to national security, to consider whether the acceptance of investments from a foreign source and the appointment of external directors would generate income. reasons to be concerned about the maintenance of production bases. and technological. These government actions do not constitute unjust intervention or pressure.

This property and other nearby facilities with national security implications have recently been targeted by Chinese and foreign buyers.

Priority to national security over the rights of activist shareholders

Toshiba has long been plagued by accounting fraud and other compliance scandals, apparently prompting activist shareholders to pay attention to its vulnerable corporate governance.

But national security issues should be clearly separated from corporate governance issues. It is natural to prioritize national security over the rights of militant shareholders. METI’s objective is to protect Toshiba from the partial sale of production bases or the leakage of sensitive technologies. The ministry has never attempted to protect Toshiba’s management team.

While Toshiba should conduct its own investigation and fulfill its corporate governance responsibilities, METI should take national security measures consistently and quietly.

(A version of this article was first published by the Japanese Institute of National Fundamentals, Speaking # 804 in Japanese on June 21, 2021.)

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Author: Masahiko Hosokawa

Masahiko Hosokawa is a professor at Meisei University and former director general of the Department of Trade Control at the Japanese Ministry of Economy, Trade and Industry. He is also a member of the planning committee of the Japan Institute for National Fundamentals.

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