Toshiba Chairman, Under Fire, Says He May Leave Once He Has Fixed Issues

In an interview with The Wall Street Journal, Mr. Nagayama said he saw it as his mission to fix the industrial conglomerate’s governance problems by bringing in new blood. He said the board needed more people who, like him, have experience running a company, and he said Toshiba needed to find a long-term chief executive to take over from the current CEO, Satoshi Tsunakawa.

“These are the two major tasks if I remain as a board member and the chairperson of the board,” Mr. Nagayama said. “When I see the whole thing set in the right order, it’s an appropriate time I consider myself to resign.”

Mr. Nagayama, 74 years old, is one of Japan’s most successful executives in dealing with foreign investors. He led a Japanese pharmaceutical company majority-owned by Switzerland’s Roche Holding AG and, as nonexecutive chairman of Sony Corp. (now Sony Group Corp.) from 2013 to 2019, helped fend off U.S. shareholders’ calls for a breakup and lay the groundwork for Sony’s rise to record profits.

Toshiba, which makes power generators, elevators, electrical equipment and other industrial goods, has proven a tougher challenge because of problems that predate him. After an accounting scandal in 2015, foreign shareholders took a majority stake in 2017 and the board was gradually revamped, with Mr. Nagayama taking over last year as nonexecutive chairman. The company is running slightly in the black but lacks strong growth areas.

Mr. Nagayama has said former CEO Nobuaki Kurumatani, who resigned under pressure on April 14, left him largely in the dark about the backroom maneuvering between the company and the government described in the June 10 report. The report said the two sides worked together to block shareholders who wanted steps such as share buybacks.

Once the report came out, Mr. Nagayama moved swiftly by ousting two board members and two executives who were named in it. Those departing include one executive who said he was working to “beat them up,” referring to foreign shareholders.

Four directors with international backgrounds who had called the report deeply disturbing said they appreciated Mr. Nagayama’s decisive moves and wanted him to stay on.

But the outcome of the June 25 shareholder vote is uncertain because other influential voices say the report’s revelations destroyed Mr. Nagayama’s ability to lead the board. The report said an audit committee investigation this year papered over the problems uncovered later, although the report didn’t say Mr. Nagayama had any direct involvement in that issue.

Two firms that advise investors on how to vote at shareholder meetings, Glass Lewis & Co. and Institutional Shareholder Services Inc., called for a “No” vote on Mr. Nagayama.

The chairman “plainly failed to act in the best interests of shareholders,” Glass Lewis said this week. ISS said he “has ultimate responsibility for the conduct of the board.”

Toshiba, which barely escaped delisting during the worst of its financial woes, returned to the Tokyo Stock Exchange’s first section in January. In April, it rebuffed a buyout offer by private-equity firm CVC Capital Partners. Mr. Nagayama has said the board would consider any offers but believes the company can increase its value in its current state.

“The stock market thinks that it is strange that Toshiba sees remaining listed as a precondition,” said Citigroup analyst Kota Ezawa.

At a May 14 earnings meeting, a representative of Toshiba shareholder Farallon Capital Management LLC expressed frustration with the company’s stance of waiting for offers. “It is impossible to make a realistic proposal unless Toshiba actively holds discussions with possible buyers,” the Farallon representative said.

In the interview, Mr. Nagayama said he wanted the board in constant conversation with outspoken foreign shareholders.

“Sometimes the company cannot deliver what they want immediately because we have different views,” he said. “What is very important for us is just to continue the dialogue…not to delay, but to find common ground.”

Write to Peter Landers at [email protected] and Megumi Fujikawa at [email protected]