Toshiba CEO, eight executives resign over doctored books
Tokyo — Toshiba’s CEO and eight other executives resigned Tuesday to take responsibility for doctored books that inflated profits at the Japanese technology manufacturer by $1.2 billion over several years.
Toshiba Corp. acknowledged a systematic cover-up, which began in 2008. Various parts of the Japanese company’s sprawling business including computer chips and personal computers were struggling financially, but top managers set unrealistic earnings targets under the banner of “challenge,” and subordinates faked results.
On top of its struggles in electronics, Tokyo-based Toshiba’s prospects in nuclear power, one of its core businesses, were shaken after the 2011 Fukushima disaster set off public fears about reactor safety, making new nuclear plants unlikely in Japan. All 48 of the nation’s working reactors now are offline.
Bowing deeply before flashing cameras at a news conference, CEO Hisao Tanaka kept his head lowered for nearly half a minute in a gesture meant to convey deep shame and contrition.
Tanaka’s predecessors, Norio Sasaki, now a vice chairman, and Atsutoshi Nishida, an adviser, also gave up their posts along with six other executives.
“We have a serious responsibility,” Tanaka told reporters. The company will need to “build a new structure” to reform itself, he said.
The company said the fraud continued through the fiscal year that ended in March, and work on revising the accounts to show the complete and true financial picture is not finished. It promised an emergency stockholder meeting for September, where it plans to deliver a genuine financial report.
Scandals are nothing new
The scandal highlights how Japan still is struggling to improve corporate governance despite recent steps to increase independent oversight of companies.
In 2011, Olympus Corp., which makes medical equipment and cameras, was embroiled in a scandal after its president Michael Woodford, a Briton, blew the whistle on a long-running cover-up of losses at the company.
Loizos Heracleous, professor of strategy at Warwick Business School in Britain, said corporate Japan still is lacking in areas such as transparency and board independence compared with the global standard.
“The Toshiba scandal will be seen in the context of the Olympus event, with investors wondering whether there is a pattern of account manipulation in corporate behavior,” he said in a commentary. “Japanese regulatory authorities will need to reassure the markets that they are casting a watchful eye over Japanese corporations.”
Toshiba repeatedly has apologized to shareholders and customers. It has set up an outside investigation group to analyze why the scandal happened and propose what needs to be done to prevent a recurrence.
The inflation of profits to meet targets was carried out not only on one or two projects, but across the board, sometimes because the projects were not breaking even, according to the report of an investigation.