Japan’s biggest provider of shareholder services said it miscounted investor votes at the annual meetings of nearly 1,000 listed companies including Toshiba, casting doubt on the credibility of AGMs in one of the world’s biggest stock markets.

The explosive admission by Sumitomo Mitsui Trust on Thursday triggered outrage from fund managers and raised questions into whether votes went uncounted because of a procedural error, as the company claims, or due to widespread industry convention overlooked for decades.

The admission came a day after Toshiba’s biggest investor demanded an independent committee investigate whether the technology company’s July shareholder meeting was fair after several funds said in a survey that they felt unable to vote “in a manner consistent with their intentions”, according to people close to the situation.

The demand was made by Singapore-based investor Effissimo in a letter to Toshiba’s board on Wednesday. The secretive fund holds just under 10 per cent of Toshiba shares and clashed with management ahead of a controversial July 31 AGM, at which a large number of votes were not counted. Toshiba declined to comment.

The findings by Sumitomo Mitsui Trust have reinforced concerns raised by investors in Japanese equities that the country’s vote-counting procedures — which still depend on physical voting cards — are antiquated and prone to miscounts.

“We will promote digital casting of votes more strongly than we have traditionally done,” said Atsushi Kaibara, senior managing executive officer of Sumitomo Mitsui Trust, at a news conference.

Company officials said vote tallying was outsourced to a company set up jointly with the trust banking arm of Mizuho Financial Group. The firm used a method that created a risk that ballots that arrived close to deadline would be overlooked.

In a sign that the scandal was likely to expand, Mizuho Trust & Banking said it would investigate how it tallies shareholder votes for 371 client companies. 

Mitsubishi UFJ Trust and Banking Corporation, which provides shareholder services for about 1,580 companies, said it had not found any problems with how it counted mailed-in ballots. 

Effissimo’s demand for an investigation of the Toshiba AGM follows revelations in the Financial Times last week of irregularities surrounding the event, at which chief executive Nobuaki Kurumatani risked being forced to step down by an investor rebellion.

Toshiba’s efforts to avoid that included engaging Goldman Sachs to defend it against activists and what has been described by investors as a “dark arts” campaign of suasion. In the weeks leading up to the AGM, one of Toshiba’s largest investors, Harvard Management Company, held private discussions with the former head of Japan’s $1.3tn government pension fund and subsequently abstained from voting.

After Mr Kurumatani survived the AGM, a number of large shareholders reviewed the circumstances of the voting. One, the Singapore-based fund 3D, discovered that the votes on about 5m of its shares had not been counted by Sumitomo Mitsui Trust.

Effissimo, meanwhile, conducted a survey of “several dozen” investors asking whether they felt that pressure applied to them ahead of the AGM meant that they voted differently to their original intentions. In its letter to Toshiba, Effissimo claimed that several of the investors felt “unable to vote in a manner consistent with their intentions”.

Effissimo’s letter said that if Toshiba had, as some investors alleged in the answers to its survey, placed undue pressure on shareholders such conduct would amount to “a denial of the most fundamental and unalienable right for shareholders”.


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