Economics » Investment » De-listing of Toshiba: Lessons in corporate governance for CFOs

De-listing of Toshiba: Lessons in corporate governance for CFOs

Under its new ownership, led by Japan Industrial Partners (JIP), Toshiba has the opportunity to revitalize itself and pursue a new future. For CFOs, this shift brings both challenges and opportunities.

The recent delisting of Toshiba from the Tokyo Stock Exchange, after a 74-year presence, marks a significant shift in the Japanese business landscape. The move comes as Toshiba’s new owners, a consortium led by private equity firm Japan Industrial Partners (JIP), aim to revitalize the struggling conglomerate and put an end to years of battles with overseas activist investors.

For CFOs and financial leaders, this development offers valuable insights into the evolving dynamics of corporate governance and shareholder relations in Japan.

Toshiba, a company synonymous with Japan’s 20th-century dominance in the electronics industry, traces its roots back to a factory established in 1875. Over the years, Toshiba’s star rose alongside the Japanese economy, making it one of the country’s best-known companies.

However, in recent years, Toshiba has faced a series of challenges, including an enormous accounting scandal and major problems at its nuclear technology subsidiary. These issues prompted share sales and the divestment of certain business units, including the flash memory chip division.

The delisting of Toshiba from the Tokyo Stock Exchange marks a significant shift for the company. The JIP-led consortium completed a $14 billion tender offer, acquiring a majority stake in Toshiba. Approximately 78.65% of Toshiba shares were tendered, surpassing the two-thirds majority required to squeeze out remaining shareholders. With the delisting imminent, the new owners are poised to steer Toshiba in a new direction.

The tech giant’stransition into private ownership is a stark reminder of the potential consequences of governance shortcomings and an institutional reluctance to act in shareholders’ interests.  The company’s journey over the past eight years, marked by an accounting fraud scandal, a financial crisis, an asset fire sale, and a bitter war between management and activist shareholders, underscores the importance of robust corporate governance and transparency.

The consortium, which includes financial services firm Orix, utility Chubu Electric Power, and chipmaker Rohm, plans to focus on revitalising Toshiba’s operations. CEO Taro Shimada, who will remain in his role following the buyout, is expected to prioritise high-margin digital services. However, the ultimate shape of Toshiba under its new ownership is yet to be determined.

Implications for CFOs

The delisting of Toshiba raises important implications for CFOs, both within the company and in the broader corporate landscape.

1. Improved stability and long-term strategy

Toshiba has highlighted the complex relationships with its stakeholders, including shareholders with differing opinions, as a hindrance to its operations. With the company going private, a stable shareholder base can provide the necessary stability and enable Toshiba to pursue its long-term strategy centred around high-margin digital services. This newfound stability can be a positive development for CFOs, as it allows for more focused financial planning and strategic decision-making.

2. Potential for divestitures and asset optimisation

As Toshiba seeks to revitalize itself under the new ownership, there is speculation that the company may undergo a breakup to realize more value. Divestitures and asset optimisation can be crucial for CFOs in streamlining operations, reducing costs, and unlocking hidden value within the organization.

3. Alignment of management and ownership

The alignment of management and ownership is a critical factor in the success of any organization. With JIP’s support for CEO Taro Shimada and the new ownership structure, there is an opportunity for improved morale and a unified vision within Toshiba. However, to succeed, management needs to effectively communicate and articulate a compelling story to investors and stakeholders.

4. Enhanced focus on digital services

Under JIP’s ownership, Toshiba is expected to prioritise high-margin digital services. This shift in focus presents opportunities for CFOs to drive growth and profitability through innovative business models, strategic partnerships, and investment in emerging technologies.

5. Impact on National Security

Toshiba’s operations are seen as critical to national security, and the delisting has drawn attention from the Japanese government. As the CFO navigates the post-delist landscape, they will need to consider the potential regulatory implications and ensure compliance with any applicable security measures.

What does all this mean?

For CFOs, the de-listing of Toshiba underscores the importance of aligning management and shareholder expectations and fostering a shareholder-focused mindset. It also highlights the need for effective communication and negotiation skills in managing relationships with diverse stakeholders, including activist shareholders.

The shift in Toshiba’s ownership structure also raises questions about the future of the company and its potential impact on the Japanese market. Some predict that without the scrutiny associated with being a public company, Toshiba will ultimately be split into several companies.

This could potentially unlock trapped value in non-core businesses, offering a valuable lesson for CFOs in evaluating their own company’s asset portfolio and strategic direction.


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