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Corporate Governance

Directors

List of Directors (after July 31, 2020)

1. Directors (12 members)

Name Corporate
management
Law and
compliance
Accounting and
auditing
Diversity* M&A Corporate
restructuring
Capital
markets
International
business
experience
Satoshi TSUNAKAWA
(Chairman)
     
Nobuaki KURUMATANI
(Representative Executive Officer, President and CEO)
     
Yuki FURUTA            
Junji OTA        
Nobuyuki KOBAYASHI            
Takashi YAMAUCHI        
Yoshiaki FUJIMORI      
Paul J. BROUGH    
Ayako Hirota WEISSMAN          
Jerry BLACK    
George Raymond ZAGE III      
Osamu NAGAYAMA          

* Diversity indicates diversity of gender, ethnicity, nationality, and other identities.

One of the 12 directors is female.

Please see here for Directors' careers.

2. Chairperson of the Board of Directors/Members of Committees

Chairperson of the Board of Directors Osamu NAGAYAMA
Nomination Committee Osamu NAGAYAMA (Chairperson)
Junji OTA
Takashi YAMAUCHI
Yoshiaki FUJIMORI
Ayako Hirota WEISSMAN
Audit Committee Junji OTA (Chairperson)
Yuki FURUTA
Nobuyuki KOBAYASHI
Takashi YAMAUCHI
Compensation Committee Yuki FURUTA (Chairperson)
Yoshiaki FUJIMORI
Jerry BLACK
Osamu NAGAYAMA

Election of twelve (12) Directors

(Source: Convocation Notice of the Ordinary General Meeting of Shareholders for the 181st Fiscal Year)

1.Reasons for Proposal

The term of office of the current 12 Directors will expire at the conclusion of this Ordinary General Meeting of Shareholders. Therefore, it is proposed to elect 12 Directors based on a decision by the Nomination Committee.
The Company is promoting a number of policies with the aim of increasing total shareholder return (TSR) through maximizing the Company's corporate value. To realize the increase of mid- to long-term shareholder value, the Company is in the process of executing the Toshiba Next Plan, a company-wide five-year road map for corporate transformation announced on November 8, 2018. At the Ordinary General Meeting of Shareholders for the 180th Fiscal Year, a revolutionary Board of Directors was elected, including Directors with appropriate diversity in terms of deep knowledge and experience in international business, business portfolio management, business transformation and M&A, and expertise in capital markets and capital allocation, as well as gender and international experience as required in the Corporate Governance Code of Japan. In particular, four of the 12 Director candidates (33%) are of non-Japanese nationality, which makes the Company's Board of Directors extremely progressive compared to the average percentage of non-Japanese board members at Nikkei 225 companies (3.5%) and TOPIX companies (5.1%) (Source: "2019 Japan Spencer Stuart Board Index" (Spencer Stuart Japan Ltd.)).
Under this renewed Board of Directors, the Company is comprehensively and thoroughly managing and reforming its business portfolio by monitoring struggling low-profitability businesses based on a strict criteria of ROS (return on sales) of 5%, and selling non-operating assets such as listed shares, functional subsidiaries, and real estate assets, putting the utmost emphasis on capital efficiency.
The Company is promoting the improvement of shareholder returns, and steadily implemented a series of share buybacks of up to 700 billion yen, one of the largest conducted in Japan, and paid a dividend with a March 31, 2020 record date despite the effects of the COVID-19 pandemic. The Company intends to maintain an average consolidated dividend payout ratio of at least 30% (*Note), and shareholders' equity in excess of the appropriate level of shareholders' equity will be used to provide shareholder returns, including share repurchases. The appropriate level of capital shall be reviewed by the Board of Directors on a regular basis. While the Company will focus in the short term on ensuring its financial stability during the unpredictable COVID-19 situation, it is the Company's intention in principle, to return the majority of the net proceeds from any KIOXIA Holdings Corporation divestiture to shareholders. Furthermore, if the external environment stabilizes enabling capital markets and the global pandemic to be more predictable in the fall, the Company expects to be in a position to undertake more proactive portfolio streamlining and divestures, including the assessment of highly accretive M&A opportunities, to continuously improve capital allocation in order to further enhance shareholder returns and the long term value of the Company.

(*Note) For the time being, equity method profit and loss for KIOXIA Holdings Corporation is excluded from Toshiba's policy on shareholder returns.

As the first phase of the Toshiba Next Plan, the Company has completed its withdrawal from the LNG business in the United States and conducted structural reforms including optimizing its personnel structure, procurement system reforms to reduce costs, optimization and reinforcement of sales systems, sales reforms including improving profitability through strengthening project evaluation and screening functions, and process reforms aiming to improve efficiency and productivity of overall operation including group-wide IT infrastructure; through these initiatives, the Group has constructed a stable, recession-resilient business portfolio focused on social infrastructure and other B2B business areas, which also coincides with the Company's mission to maintain social infrastructure for the safety and security of society, and improved basic profitability.
Regarding the Company's 40.2% holding in KIOXIA Holdings Corporation, as already announced, the Company has no strategic intention to remain in the Memory business. Therefore, the Company intends to realize the value of its investment in KIOXIA Holdings Corporation and continues to evaluate alternatives means of monetizing its stake. Once such a monetization event is completed, the Company, in principle, intends to return a majority portion of the net proceeds to shareholders.
As part of its continuing efforts to rationalize its business portfolio, the Company will seek to further grow the infrastructure service businesses and data services businesses. As for monitored businesses, as previously defined, such as the System LSI business and the Printing business, the Company is considering its available options. As for the Printing business, since Toshiba TEC Corporation is a listed subsidiary and the Company recognizes the independence of Toshiba TEC's board and management, we will continue to closely monitor its recovery plans and progress. The Company will discuss the measures necessary to be taken for the printing business from its position as Toshiba TEC's shareholder.
The Company made applications for reinstatement to the First Sections of the Tokyo and Nagoya Stock Exchanges in April 2020. Furthermore, the Toshiba Next Plan: Phase 2 will aim for further growth by transforming the Company into an infrastructure services company leveraging Cyber Physical Systems (CPS) technology (see Note).

Note: CPS is a framework for the creation of added value by gathering data in the physical world, analyzing that data in the cyber world using digital technologies and creating actionable information and knowledge, then feeding those back into the physical world.

Since 2015, the Company has considered the enhancement of internal control to be a high-priority issue, and has worked to strengthen governance through changes to the Board of Directors regime, and to improve control by reducing the number of subsidiaries. However, as announced on February 14, 2020, it has been discovered that Toshiba IT-Services Corporation, a consolidated subsidiary of the Company, was involved in so-called cyclical transactions and fictitious transactions without actual merchandise. The Company is taking this incident seriously, and the executive side, led by the Representative Executive Officer and Chairman and CEO (at that time), swiftly addressed the incident by reporting it to the Audit Committee and engaging outside experts to conduct a thorough investigation. That investigation was conducted in a highly transparent manner that ensured objectivity and expertise, with the material parts of the investigation and reporting being led by the outside experts. Based on the results of that investigation, the Board of Directors also deliberated the causes of the incident and measures to prevent recurrence, made timely and appropriate disclosures, and implemented radical measures to prevent recurrence including a general prohibition on balancing transactions whose end users cannot be confirmed.
The Company has been engaged in ongoing improvement of its internal control systems since 2015, and in order to further address the risk of misconduct, will further strengthen its "three-line defense" comprised of cultural change, improvement of IT systems, and establishment of a Compliance Advisory Meeting:
As the first line of defense, at the operational front-lines, it is important for top management to speak about and inculcate the importance of compliance, and continue to do so, with a view to cultural change. The Company will also introduce a personnel evaluation system that emphasizes conduct evaluation, expand training for the purpose of developing and raising compliance awareness, and increase the adoption of the whistleblower system.
The second line of defense is checking by back-office departments. Functions that act as a check on the front-line departments, such as finance, accounting, and procurement, will be made to report directly to Corporate, separating their reporting lines from operating departments and ensuring the effectiveness of their checking function. This process is already underway. The Company is also introducing a new risk management system and introducing next-generation IT systems to improve data collection functions and prevent and visualize human error. The reduction of subsidiaries already implemented under the Toshiba Next Plan will also continue, which will enhance group governance.
The third line of defense is the enhancement of the auditing function. The Company will improve its ability to discover risks of misconduct through a variety of measures, including enhancing the checking function through the establishment of a Compliance Advisory Meeting including outside experts which will coordinate with the Risk-Compliance Committee for the whole Group, increasing staff for the audit function, and strengthening coordination between the Audit & Supervisory Board members of the group companies.
Based on its renewed recognition that a single incident of misconduct may undo many years of hard work, the Company will thoroughly implement measures to prevent recurrence and work to further enhance its internal control.

As a result, the Company proposes that the Board of Directors be structured as follows, and is confident that the 12 candidates in this Proposal are the best suited for achieving sustainable growth and increasing shareholder value over the mid- to long-term.

  • (1) The number of Directors will be 12, with only the Representative Executive Officer, President and CEO being a Director concurrently serving as an executive officer, accompanied by one non-executive Inside Director, and ten Outside Directors. The Company previously set the number of Directors around 11 in order to enable substantive and thorough discussions and maintained the number of Outside Directors at more than half of the Board members in order to ensure effectiveness of oversight and supervision of business execution. The Company's new Board composition further advances this idea by minimizing the number of Directors concurrently serving as executive officers, while maintaining the current number of Directors.
  • (2) The proposed Board of Directors remains innovative in its composition – while reflecting the composition of the Company's shareholders, it includes four non-Japanese candidates, and ensures that candidates have experience in international business, expertise in business portfolio management, business transformation, M&A, capital markets and capital allocation, and law and compliance, which are the skill sets essential to promoting the execution of the Toshiba Next Plan: Phase 2 and appropriately handle high-risk matters. Of the 12 candidates, one is a newly nominated candidate.
  • (3) The Director candidates include an attorney-at-law with experience as a former Deputy Prosecutor-General of the Supreme Public Prosecutors Office who also served as a Supreme Court justice for six years and eight months, a certified public accountant who served as the Representative Member of a prominent audit corporation, Crowe Toyo & Co. for six years and seven months, a leading expert of corporate governance in Japan with experience as a former chairman of the Japan Audit & Supervisory Board Members Association and a member of the METI Corporate Governance System Study Group, and members with experience as full-time Audit & Supervisory Board members at some of Japan's largest companies. We are confident that this is the best management team from the perspective of enhancing internal control.

In deciding the candidates for Director, the Nomination Committee judged that the candidates conformed to the Director Nomination Criteria separately designated by the Nomination Committee and that the candidates have the appropriate qualifications for Directors. The specific details of the Director Nomination Criteria and the Independence Criteria for Outside Directors are described as follows.

Director Nomination Criteria

When determining the content of proposals regarding the election of directors, the Company will select candidates who fulfill the following criteria and who are able to appropriately fulfill the duties of monitoring and supervising business execution and determining the direction of management strategies:

  1. Being a respected, dignified, and highly ethical person;
  2. Being responsive to compliance with laws and regulations;
  3. Being in good health to conduct the required duties;
  4. Having the ability to make objective judgments on management issues as well as excellent foresight and vision;
  5. Having no interest in or transaction with the Company's main business fields that might affect management decisions;
    and
  6. For outside directors, having expertise, insight, and a good track record in a field such as law, accounting, or corporate management.
Independence Criteria for Outside Directors

In addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan, the Nomination Committee will judge any outside director falling under any of the following items to lack independence:

  1. The outside director currently belongs or at any point in the past three years has belonged as an executive director, executive officer, or employee to a company in which the Company currently holds 10% or more of the voting rights.
  2. The outside director currently belongs or at any point in the past three years has belonged as an executive director, executive officer, or employee to a company that currently holds 10% or more of the voting rights of the Company.
  3. The outside director currently belongs or at any point in the past three years has belonged as an executive director, executive officer, or employee to a company whose transactions with the Company in any of the past three fiscal years totaled a monetary amount exceeding 2% of the consolidated net sales of that company or the Company
  4. The outside director currently is or at any point in the past three years has been an executive director, executive officer, or employee of a financial institution from which the Company currently borrows funds equal to 2% or more of its total assets
  5. The outside director has in any of the past three fiscal years received compensation other than director compensation exceeding ten million yen from the Company as a law, accounting, or tax expert or consultant; or an organization to which the outside director belongs has in any of the past three fiscal years received from the Company compensation as a law, accounting, or tax expert or consultant exceeding 2% of the annual revenue of that organization.
  6. In any of the past three fiscal years, the Company has made contributions exceeding ten million yen to the outside director or to a corporation to which the outside director currently belongs or at any point in the past three years has belonged as an officer that executes business or as an employee. However, in case of contributions to a corporation, this applies when the outside director was directly involved in the research, education, or other activity concerning the contributions.
  7. The outside director currently belongs or at any point in the past three years has belonged as an executive director, executive officer, or employee to a company whose outside officers currently include any persons with experience as an officer of the Company that executed business.
  8. The outside director currently is or at any point in the past three years has been a representative officer, officer, or employee of the current accounting auditor (independent auditor) or an accounting auditor (independent auditor) in the past five fiscal years of the Company.

2. Reasons of election as outside directors and their significant concurrent positions

(Source: Corporate Governance Report (published on August 25, 2020))

Name Supplementary Explanation of the Relationship Reasons of Appointment
Yuki
FURUTA
Mr. Yuki FURUTA is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges. Mr. Yuki FURUTA is appropriately supervising the management of the Company based on his extensive experience as a legal expert and broad expertise in corporate legal matters and corporate governance.
He does not maintain relationships, transactions, or ot her significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
Junji
OTA
Mr. Junji OTA is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
He served as an executive of Nippon Steel Corporation, a business partner of the Company, in the pas t, but ten years have passed since his resignation as an executive, and the volume of transactions between that company and the Company is less than 1% of each party's consolidated net sales, and therefore has no significant impact on his independence as an outside director.
[Significant concurrent positions]:
Outside Director, Heiwa Real Estate Co., Ltd.
Mr. Junji OTA is appropriately supervising the management of the Company based on his experience as an executive, including corporate planning at a large manufacturing company, and extensive experience and broad expertise as an officer of the Japan Audit & Supervisory Board Members Association.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
Nobuyuki
KOBAYASHI
Mr. Nobuyuki KOBAYASHI is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
[Significant concurrent positions]:
Representative Director & President, Eishin Partners Co., Ltd.
Outside Director (Audit and Supervisory Committee member), Imagineer Co., Ltd.
Mr. Nobuyuki KOBAYASHI served as the representative of a mid-to-large size accounting firm in Japan in the past, has deep expertise in finance, accounting, and auditing, and is appropriately supervising the management of the Co mpany and its accounting auditor based on his extensive experience and broad expertise as a certified public accountant.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
Takashi
YAMAUCHI
Mr. Takashi YAMAUCHI is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
He served as an executive of MITSUI & CO., LTD., a business partner of the Company, in the past, but five years have passed since his resignation as an executive, and the volume of transactions between that company and the Company is less than 1% of each party's consolidated net sales, and therefore has no significant impact on his independence as an outside director.
Mr. Takashi YAMAUCHI has strong expertise in the management practices of Japanese companies, deep international business experience, and expertise in the auditing of Japanese companies involved in a wide range of businesses, and is appropriately supervis ing the management of the Company based on his extensive experience and broad expertise.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
Yoshiaki
FUJIMORI
Mr. Yoshiaki FUJIMORI is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
He served as an executive of LIXIL Group Corporation , General Electric Company and its Japanese subsidiaries , a business partner of the Company, in the past, but five years have passed since his resignation as an executive, and the volume of transactions between that company and the Company is less than 1% of each party's consolidated net sales, and therefore has no significant impact on his independence as an outside director.
[Significant concurrent positions]:
Outside Director, Takeda Pharm aceutical Company Limited
Outside Director, Boston Scientific Corporation
Senior Executive Advisor, CVC Asia Pacific (Japan) Kabushiki Kaisha
Outside Director and Chairman, Oracle Corporation Japan
Outside Director, Shiseido Co., Ltd.
Senior Executive Adviser, Genpant Limited
Mr. Yoshiaki FUJIMORI has deep experience in international business regarding the electronics industry, which is the Company's main business area. In addition, he is an expert in the management of large Japanese companies through his experience as CEO and outside director of leading Japanese listed companies.
He is appropriately supervis ing the management of the Company based on his experience in international business and extensive experience and broad expertise as a top management of large companies.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
Paul J.
Brough
Mr. Paul J. BROUGH is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
[Significant concurrent positions]:
Independent Non Executive Director, GL Limited
Independent Non Executive Director, Vitasoy International Holdings Limited
Chief Executive, Blue Willow Limited
Mr. Paul J. BROUGH is a Chartered Accountant in the United Kingdom. He has significant expertise in finance and accounting, deep experience in M&A and business restructuring as a financial advisor and as a Chief Restructuring Officer for a number of companies, and has experience in international business from serving in positions such as executive director for multinational companies.
He is appropriately supervis ing the management of the Company based on his experience in international business, deep experience in M&A and business restructuring, and extensive experience and broad expertise as a management executive.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
Ayako
Hirota
Weissman
Ms Ayako Hirota WEISSMAN is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
[Significant concurrent positions]:
Senior Vice President, Senior Portfolio Manager and Director in charge of Asia Strategy, Horizon Kinetics LLC
Non Executive Director, Nippon Active Value Fund plc
Ms. Ayako Hirota WEISSMAN has many years of experience in many aspects of the investment business, including her experience investing in both Japanese and foreign stocks, giving her particularly deep experience and expertise in the area of investment. In addition to her experience in international business, she is an expert in Japanese business through her experience as an outside director of a Japanese company. She is appropriately supervis ing the management of the Company based on her extensive experience and broad expertise.
She does not maintain relationships, transaction s, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
Jerome
Thomas
Black
Mr. Jerome Thomas BLACK is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
He has served as an executive of Aeon Co., Ltd., a business partner of the Company, in the past, but the volume of transactions between that company and the Company is less than 1% of each party's consolidated net sales, and therefore has no significant impact on his independence as an outside director.
[Significant concurrent positions]:
Advisor, Aeon Co., Ltd.
Mr. Jerome Thomas BLACK has experience in an international consulting firm, and has worked for many years in the business execution of Japanese companies.
He has experience in business execution as a manager of group strategy and IT/digital business, strong expertise in the management of Japanese companies, and experience in international business, and is appropriately supervis ing the management of the Company based on his extensive experience and broad expertise.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
George
Raymond
Zage III
Mr. George Raymond ZAGE III is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
[Significant concurrent positions]:
Independent Non Executive Director of Whitehaven Coal Limited
Founder and CEO, Tiga Investments Pte. Ltd.
Commissioner(Non Executive), PT Lippo Karawaci Tbk
Mr. George Raymond ZAGE III has experience investing in a number of listed and unlisted companies, and also in startup investment and investment for corporate rehabilitation, through his work with a prominent investment fund group. With his experience in investment fund, he is expected to bring his expertise in business portfolios, business restructuring, M&A, capital markets, and capital allocation to the Board of Directors, and is appropriately supervising the management of the Company.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.
He was the managing member of Farallon Capital Asia Pte. Ltd., part of the Co mpany's major shareholder Farallon Capital Group, until August 2018. Because Farallon Capital Group holds less than 10% of the voting rights of the Company, this does not affect his independency.
He has indicated his intention to perform his duties as a director for the Company, and not any specific shareholder.
Osamu
NAGAYAMA
Mr. Osamu NAGAYAMA is an Independent Officer as stipulated by the Tokyo Stock Exchange and other financial instruments exchanges.
[Significant concurrent positions]:
Senior Adviser (Honorary Chairman), Chugai Pharmaceutical Co., Ltd.
President, Japan Bioindustry Association
Chairman, Tokyo Biochemical Research Foundation
Mr. Osamu NAGAYAMA has extensive experience and broad expertise in management as the CEO of the global corporation Chugai Pharmaceutical Co., Ltd. and deep familiarity with the electronics industry from his experience as an outside director of Sony Corporation, and because he is expected to appropriately supervise the management of the Company.
He does not maintain relationships, transactions, or other significant interests as stipulated in the Independence Criteria for Outside Directors established by the Company in addition to the independence criteria established by Tokyo Stock Exchange, Inc. and other financial instruments exchanges in Japan.

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