Toshiba president resigns amid accounts scandal
Hisao Tanaka leaves his position after Toshiba reveal overstated profits across the past six years.
Toshiba’s chief executive Hisao Tanaka has today resigned from his position after the technology conglomerate admitted to overstating their profits for the past six years. On Monday, an independent panel verified that Toshiba had embellished their operating profit by a total of 151.8 billion Yen, the equivalent to $1.22 billion or £780 million.
The electronics company founded in 1938, which has an immense range of products and services from household appliances to medical equipment and power stations, had previously estimated the overstatement was approximately a third of the actual results. Toshiba will now be forced to restate its profits from April 2008 to March 2014.
In a statement to the world’s media, Toshiba said: “It has been revealed that there has been inappropriate accounting going on for a long time, and we deeply apologise for causing this serious trouble for shareholders and other stakeholders.
“Because of this Hisao Tanaka, our company president, and Norio Sasaki, our company’s vice chairman… will resign today.”
Tanaka in a press conference on Tuesday was similarly remorseful, stating: “I see this as the most damaging event for our brand in the company’s 140-year history. I don’t think these problems can be overcome overnight.” The outgoing president did not claim to have deliberately told anyone to falsify accounts, but investigators suggested that he and Sasaki created a pressurized environment that compelled managers to overstate figures to meet high targets.
Tanaka and Sasaki joined Toshiba in the 1970’s, and Sasaki acted as president between June 2009 and June 2013, the period in which most of this false accounting took place. They are among eight high-level executives that have appeared to been involved in an intentional scheme to inflate the company’s profits in order to appease shareholders.
Investigators into the scandal examined in particular unrealistic targets set for new operations in 2011, following fears that the Fukushima disaster would damage Toshiba’s nuclear division. “Within Toshiba, there was a corporate culture in which one could not go against the wishes of superiors,” the report said.
“Therefore, when top management presented ‘challenges’, division presidents, line managers and employees below them continually carried out inappropriate accounting practices to meet targets in line with the wishes of their superiors.”
This is the latest of serious corporate governance misconducts in recent years for Japan, with optics manufacturer Olympus part of a similar cover-up in 2011, where executives looked to hide $1.7 billion worth of losses from investors. Finance Minister Taro Aso stated concern that this current scandal will negatively effect global confidence in Japan’s corporations.
Toshiba’s shares grew by 6% following this news, as it ended speculation as to the extent of the problem within the company. However, they remain down by about a quarter on the stock exchange since the investigation into the accounts first revealed evidence of irregular handling back in April.
Experts are unsure how this scandal will effect the electronics firm going forward, although they can expect a board overhaul and potentially huge fines and sanctions as a result of this deception. Toshiba had already been part of a nationwide issue for Japanese tech firms, as they have been losing competitiveness in their market to Korean and Chinese rivals.
Toshiba will have a shareholders meeting in September to approve a new board, whilst the company is still yet to announce its earnings for the 2014 fiscal year.
