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Effissimo tells Toshiba that shareholders make good directors

FILE PHOTO: The logo of Toshiba Corp is seen as window cleaners work on the company's headquarters in Tokyo, Japan, February 14, 2017. REUTERS/Toru Hanai

BOSTON (Reuters) - Effissimo Capital Management, which wants to install three directors on Toshiba Corp’s board, told the Japanese conglomerate’s directors that shareholders make good board members because they are invested in the company’s future.

“A major shareholder is incentivized to exercise judgments to maximize interest for the company,” Effissimo, which owns 15% of Toshiba, wrote in a letter to the directors that was seen by Reuters. “A major shareholder is in a superior position to tackle the ‘collective action problem,’” it said in the letter, which was dated July 13.

Effissimo, which is Toshiba’s top shareholder, is pushing back privately at Toshiba’s public message that shareholders should be disqualified from sitting on boards because they would be riddled with conflicts of interest. The standoff between one of Japan’s most storied companies and the Singapore-based investment fund, which is run by Japanese nationals, is playing out as more investors, including U.S. activists, are pushing for changes at Japan’s biggest corporations.

Effissimo is proposing its chief executive, Yoichiro Imai, and two others be elected as outside directors, arguing that more progress on corporate governance is needed after an accounting scandal in 2015. Toshiba’s annual meeting is planned for July 31.

“Additional and potentially conflicted investor representation is not additive to the current board composition,” a spokesman for Toshiba said.

Last week Toshiba board member Junji Ota, who chairs the nominating committee, dismissed Imai’s candidacy in several media outlets. “Imai as a candidate is out of the question ... there is the issue of conflicts of interest,” he told Nikkei Business. “It wouldn’t be acceptable to have someone recusing himself from each resolution,” Ota added.

Toshiba acknowledged its more international ownership last year when it added seven independent directors, including George Zage, a former executive at U.S. hedge fund Farallon Capital Management. Toshiba declined to nominate Brian Higgins, a co-founder of U.S. hedge fund King Street, after the investment firm mounted a campaign against the company last year.

Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler

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