A majority of Toshiba Corp. shareholders on Thursday rejected a management proposal to split the Japanese conglomerate into two listed companies, leaving the company floundering as it aims to reform its image following a string of scandals.
Toshiba, a household name in Japan with a nearly 150-year history, had sought support for the new reform plan at an extraordinary shareholders' meeting after its earlier plan to divide into three was met with opposition.
The outcome of the vote is not legally binding but indicates likely rejection when the company holds a planned regular shareholders' meeting in June 2023 for a final decision.
"We will consider a range of options to improve corporate value," Toshiba President and CEO Taro Shimada said following the results of the vote.
A proposal by some activist shareholders to take the firm private through selling Toshiba shares to foreign hedge funds, among other entities, was also rejected at the meeting.
The dismissals emphasized the uncertainty over Toshiba's future as its shareholders and management battle over what recourse best serves the company, half of which is owned by foreign entities.
In November, the firm initially proposed a plan to split into three listed companies -- two spinoffs that would focus respectively on the infrastructure and device businesses and a third that would own a stake in flash-memory chip company Kioxia Holdings Corp.
The move was seen as an attempt to appease shareholders frustrated by lackluster efforts to boost growth and corporate value, with former President and CEO Satoshi Tsunakawa saying the overhaul would allow each new company with specialty areas to make decisions and operate with agility.
But the three-way split was revised in February amid opposition from some activist stakeholders, who speculated it would only create three underperforming companies, leading Toshiba to propose a new strategy to transform into two firms instead.
The new plan would have seen it spinning off in the second half of fiscal 2023 its device business, including its semiconductor and hard disk drive segments, but keeping the infrastructure unit within Toshiba.
However, the sudden shift to the controversial proposal raised confusion among shareholders, leading Shimada to take the helm from Tsunakawa following a demand for a shake-up in management.
Toshiba, seen as a company critical to national security, turned to foreign investors for their support following a whirlwind of events over the past few years that tarnished its image, including an accounting scandal in 2015.
Their influence in Toshiba grew after it floundered following the 2016 bankruptcy of its U.S. nuclear plant subsidiary Westinghouse Electric Co.
Meanwhile, an independent investigation panel found in June that Toshiba executives had colluded with the Ministry of Economy, Trade and Industry to prevent foreign activist shareholders from influencing the board by sending in directors, a revelation that forced its board chairman and another director to be voted out in a general shareholders' meeting.
Toshiba has a variety of businesses, from nuclear power and elevators to hard disk drives and semiconductors. In fiscal 2020, which ended in March 2021, it had over 3 trillion yen ($24.8 billion) in sales.
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"We will consider a range of options to improve corporate value," Toshiba President and CEO Taro Shimada said following the results of the vote.
A proposal by some activist shareholders to take the firm private through selling Toshiba shares to hedge funds, among other entities, was also rejected at the meeting.
The firm initially proposed in November a plan to split into three listed companies -- two spinoffs that would focus respectively on the infrastructure and device businesses, and a third that would own a stake in flash-memory chip company Kioxia Holdings Corp.
The move was seen as an attempt to appease shareholders frustrated by lackluster efforts to boost growth and corporate value, with former President and CEO Satoshi Tsunakawa saying the overhaul would allow each new company with specialty areas to make decisions and operate with agility.
But the three-way split was revised in February amid opposition from some activist stakeholders, who speculated it would only create three underperforming companies, leading Toshiba to propose a new strategy to transform into two firms instead.
The new plan would have seen it spinning off in the second half of fiscal 2023 its device business, including its semiconductor and hard disk drive segments, but keeping the infrastructure unit within Toshiba.
However, the sudden shift to the controversial proposal raised confusion among shareholders, leading Shimada to take the helm from Tsunakawa after the shareholders called for a shake-up in management.
The release of the business strategy has weighed heavy on the firm's image, which had previously been damaged by an accounting scandal in 2015.
Meanwhile, an independent investigation panel found in June that Toshiba executives had colluded with the Ministry of Economy, Trade and Industry to prevent foreign activist shareholders from influencing the board by sending in directors, a revelation that forced its board chairman and another director to be voted out in a general shareholders' meeting.
Toshiba has a variety of businesses, from nuclear power and elevators to hard disk drives and semiconductors. In fiscal 2020, which ended in March 2021, it had over 3 trillion yen ($24.8 billion) in sales.
