Responsibility of Independent Directors – Toshiba’s case  Masatoshi Yasuda

March 10,2017

The seven independent directors were involved in the resolution of the acquisition of S&W by WH on the Toshiba's board meeting on October, 2015. Fourteen months after the acquisition, Toshiba announced US$ 6.1 billion losses caused by the acquisition. I believe that each of the independent directors has a responsibility to account for what had been going on the whole WH related businesses which are fizzling out.

Toshiba’s announcement and the attached materials on February 14, 2017 replaced my suspicion with my confidence that the management of the company had been covering up the losses caused by the nuclear power business for quite a long time.

According to the materials, Westinghouse (WH) made contracts with Georgia Power Company and South Carolina Electric & Gas Company for two nuclear power plants for each during the period of April to May in 2008. Tightened regulations on nuclear power plants in the United States after the accidents at the Fukushima Nuclear Power Plant in March, 2011 caused serious increases in costs of the project and then, WH and S&W, the other party of the construction consortium got into dispute over how to share the increased costs among them. Eventually, it worsened to become a lawsuit between them. In order to solve this problem, WH started considering acquisition of S&W and did the due diligence on S&W in August, 2015. Based on the due diligence report, WH scrutinized latent risks in the acquisition.

The chronological order is important here. Just one month before the temporary management team with Mr. Muromachi as the president started in September, 2015, this acquisition of S&W was seriously examined by WH. Then, at the board meeting on October, 2015, which was the first one since the temporary management team was formed, the board had resolved the acquisition of S&W by WH. On the board there were seven independent directors and six of them were newly elected with expectation that they would contribute to change the chronic tendency to cover-up and reform its corporate governance from outsider’s point of view. It was also unveiled that they were informed of the impairment losses of the WH’s goodwill on November 7, 2015. It means that they accepted a directorship position without any knowledge about the losses on September, 2015.

In this situation, I seriously wonder what these independent directors had been doing at the board meeting and outside of the board. Was the due diligence report presented to them or did they agree with the acquisition without the due diligence report and other important information?

I believe that each of the independent directors has a responsibility to account for what had been going on the whole WH related businesses which are fizzling out.


By Masatoshi Yasuda

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