Toshiba president quits over accounting scandal

Wed, Jul 22, 2015 page15

Toshiba president quits over accounting scandal

PROFIT TYRANTS: A report into the firm described a corporate culture in which bosses who could not be challenged were intent on boosting profits at any cost
- AFP, TOKYO
Toshiba Corp president Hisao Tanaka and his predecessor, Norio Sasaki, resigned yesterday over a US$1.2 billion accounting scandal blamed on management’s overzealous pursuit of profit that has battered one of Japan’s best-known firms.
The two men were among eight high-level executives and directors at the sprawling conglomerate to take the fall, stepping down after an independent report found senior management complicit in a years-long scheme to pad profits.
In a stinging indictment, the report by a company-hired panel said managers were involved in “systematically” inflating profits over several years, in one of the most damaging accounting scandals to hit Japan in recent years.

Toshiba chairman Masashi Muromachi, third right, Toshiba president Hisao Tanaka, second right, and corporate executive vice president Keizo Maeda, right, bow at the beginning of a press conference at the company’s headquarters in Tokyo yesterday.

Photo: AFP

“It has been revealed that there has been inappropriate accounting going on for a long time, and we deeply apologize for causing this serious trouble for shareholders and other stakeholders,” a company statement said. “Because of this, Hisao Tanaka, our company president, and Norio Sasaki, our company’s vice chairman ... will resign today.”
Tanaka, 64, and Sasaki, 66, both joined Toshiba in the early 1970s. Sasaki served as Toshiba president from June 2009 to June 2013, covering most of the period during which the company inflated profits.

Chairman Masashi Muromachi is to take over as president in the interim, the company said.
The panel, headed by a former Tokyo prosecutor, painted the picture of a corporate culture where underlings could not challenge powerful bosses who were intent on boosting profits at almost any cost.
“Inappropriate accounting was systematically carried out as a result of management decisions... betraying the trust of many stakeholders,” according to a summary of the report released by the firm late on Monday.
“Toshiba had a corporate culture in which management decisions could not be challenged,” it added, ahead of the release of the full report yesterday afternoon.
Despite the storm engulfing the company, Toshiba shares jumped yesterday as the report ended months of uncertainty about the extent of the accounting problems, and who was to blame.
The Tokyo-listed shares soared 6.13 percent to ￥399.90 by the close.
The findings drew a rebuke from Japanese Minister of Finance Taro Aso, who called the affair “woefully regrettable.”
“This could damage the credibility of the Japanese market,” he said.
In May, Toshiba warned over the ballooning accounting “irregularities” and yanked its earnings forecast — a ￥120 billion (US$960 million) net profit on sales of ￥6.7 trillion — for the past fiscal year.
The findings mean Toshiba will have to restate its profits by ￥151.8 billion from April 2008 to March last year. It is unclear whether this will affect the fiscal year ending March next year.
“In some cases top management and division leaders appeared to have shared a common objective to inflate profits,” the panel said.
“Employees were pressured into inappropriate accounting by postponing loss reports or moving certain costs into later years,” it said.
Among the divisions affected by the inflated profits are the infrastructure, audio-visual and semiconductor businesses, the summary said.
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