Analysis: “Shuttle Diplomacy Gone Bad”: How the Japanese investment star got embroiled in a dispute with Toshiba’s board of directors

Hiromichi Mizuno, Executive Managing Director and Chief Investment Officer of the Government Pension Investment Fund in Japan and Co-Chair of the Global Capital Markets Advisory Council for the Milken Institute, speaks at the 22nd Annual Milken Institute Global Conference in Beverly Hills, California, States United, May 1, 2019. REUTERS / Mike Blake

BOSTON / TOKYO, July 16 (Reuters) – Hiromichi Mizuno’s connections, spanning the Japanese government to Harvard University, have made him a leading voice among climate-focused investors around the world.

Now those links have placed his own conduct under scrutiny after an independent report focused on Mizuno’s role in alleged collusion between Toshiba Corp (6502.T) management and Japan’s Commerce Ministry to prevent foreign investors from operating influence on the board of directors of the conglomerate.

The revelations contributed to the ousting of the president from Toshiba last month.

Mizuno said in a recent interview that he hadn’t exerted any pressure on Harvard and only volunteered to help the foundation understand how things worked in Japan. He and government officials disputed the report’s findings and said it did not reflect Mizuno’s account.

The dispute highlights the tension between the two sides of Mizuno’s career – the champion of sustainable investing and the government insider – as foreign shareholders try to judge Japan’s receptiveness to investment in the world. ‘foreign.

Abby Adlerman, adviser to the boards and CEO of Boardspan, a provider of corporate governance software, said it would have been better if Mizuno stepped down from talks at Harvard. “All of this recognition and access to information means he is being pulled in different directions as to his loyalty and has responsibilities to many parties,” she said.

The current situation, she said, is that “shuttle diplomacy has gone badly”.

Mizuno said he only volunteered to help university officials as part of the Harvard community, where he was about to start a college scholarship.

“I did what I could to help both Harvard and the Japanese government” make informed decisions, he said.

PROMOTE MANAGERS

The description in the report of a powerful government insider putting all his weight in contrast to the civic personality Mizuno cultivated as the investment manager of the 1.6 trillion government pension investment fund (GPIF). Japanese dollars and was polite as a director of Tesla Inc (TSLA.O).

Mizuno received an MBA from Northwestern University and joined GPIF in 2015 with London-based private equity firm Coller Capital.

This position has given him a platform to become a leading voice for the consideration of environmental, social and governance (ESG) issues in investment decisions.

But his approach has caused friction with people concerned that the GPIF will become actively involved in the Japanese stock market or go beyond its enabling legislation, according to a Harvard Business School case study of its efforts.

Mizuno left GPIF last year, but retained his ties to the government as a special adviser to the Japanese Ministry of Economy, Trade and Industry (METI), holding this post until ” he was appointed United Nations Special Envoy for Sustainable Investment in December.

“He has a style that is not traditional, and that makes people uncomfortable at times. But he is seen by the international crowd as an important champion of ESG practices, and that makes him a hero outside of the world. Japan, ”said Alicia Ogawa, who heads a center focused on Japanese corporate governance at Columbia University.

“SOMEONE WITH CONNECTIONS”

Mizuno’s college scholarship was at Harvard Business School, separate from Harvard Management Co., or HMC, which manages the university’s $ 41 billion endowment. HMC had a 4% stake in Toshiba, one of the largest shares of shares, which caught Toshiba’s attention when it sought to pressure investors against candidate outside directors last summer. .

The company also requested intervention from METI, which could use new foreign investment rules to block applicants. L4N2CP1E5

When that didn’t work and HMC refused to meet with Toshiba, METI referred to the company as Mizuno as “someone with ties to HMC,” according to the shareholder-commissioned survey conducted by three lawyers.

Still, Mizuno would be an unlikely messenger to tell a shareholder to back down, having spent years emphasizing governance issues.

He once cautioned on Twitter against Japan’s foreign investment rules, fearing that they would give foreign investors “the impression of a setback in corporate governance or anti-activism. shareholder”.

He told Reuters that no one asked him to pass messages on to HMC, and that he told METI that Harvard was not an activist but rather “a very sophisticated long-term investor. I volunteered to volunteer. to talk to Harvard to prove my point. METI didn’t stop me. “

Mizuno said HMC leaders praised his contribution. HMC officials declined to comment.

Masayoshi Arai, director general of METI’s Bureau of Trade Policy and Information, said that although a METI official gave Toshiba the name Mizuno, “He simply told Toshiba that Mizuno was invited by HMC to give advice; he never said Toshiba should ask Mizuno or METI would ask Mizuno “.

The report revealed that after discussions with Mizuno, HMC did not vote, a result useful to Toshiba.

Some analysts say it’s still unclear how METI will apply the new law to foreign investors, and the Tokyo Stock Exchange chief has asked Toshiba for more details.

Arai said Japan is open to foreign investment, although national security concerns should be a top priority. Read more

METI may have been happy to let Mizuno speak at Harvard, said Ulrike Schaede, a University of California professor who tracks Japanese affairs, but it’s still unclear how open officials want the Japanese economy to become. .

“The Toshiba case highlights the burning question of where on this spectrum Japan wants to fall,” Schaede said.

Mizuno declined to comment on his take on the new trade rules. But, he said, he is known as someone who does not take “instruction from anyone.”

Reporting by Ross Kerber in Boston and Makiko Yamazaki in Tokyo; Editing by David Dolan and Gerry Doyle

Our standards: Thomson Reuters Trust Principles.


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