Toshiba’s chief executive falls on his sword in accounting scandal
Published 22/07/2015 | 02:30
Toshiba’S chief executive Hisao Tanaka and a string of other senior officials resigned yesterday over their roles in the country’s biggest accounting scandal in years.
Mr Tanaka will be temporarily replaced by chairman Masashi Muromachi after an independent inquiry found the chief executive had been aware the company had inflated its profits by $1.2bn (€1.1bn) over a period of several years.
“I see this as the most damaging event for our brand in the company’s 140-year history,” Mr Tanaka told a news conference after making a ritual deep bow of contrition to a flurry of camera shutters and flashes.
“I don’t think these problems can be overcome overnight.”
Mr Muromachi is considered a safe pair of hands to lead Toshiba through its current turmoil before handing the reins to a successor. The company plans to announce next month the delayed business results for the financial year ended in March.
Mr Tanaka’s predecessors as presidents of the laptops-to-nuclear conglomerate, vice chairman Norio Sasaki and adviser Atsutoshi Nishida, will also step down after the third-party report showed they had a part in overstatement of profits going back to the 2008 financial year.
A total of eight officials resigned yesterday and Mr Tanaka said the company is now considering appointing outside directors to over half of its board seats. Monday’s report by an outside panel of accountants and lawyers said Toshiba had overstated its operating profit by $1.22bn, roughly triple Toshiba’s initial estimate.
Mr Tanaka and Mr Sasaki pressured business divisions to meet difficult targets and knew they were overstating profits and delaying the reporting of losses, amid a culture of not going against the wishes of superiors, the report said.
Koichi Ueda, an attorney and head of the panel, said he was surprised by what they had found. “That a company that represents Japan, to be doing something like this institutionally, was shocking,” he told reporters yesterday.
Mr Tanaka did not dispute the findings, but said he had no intention of encouraging irregularities. “It’s not my understanding that I gave orders for improper accounting, but the reality is that such an observation has been made,” he said.
The findings are expected to lead to the restatement of earnings and potentially hefty fines in Japan’s worst boardroom scandal since Olympus was found to have covered up $1.7bn (€1.5bn) in losses.
Japanese Finance Minister Taro Aso said yesterday that the accounting irregularities at Toshiba were “very regrettable”, coming at a time when Prime Minister Shinzo Abe is trying to regain global investors’ confidence with better corporate governance guidelines.
Mr Aso declined to comment when asked if Toshiba would face any kind of financial penalty. Sources have said regulators were beginning their own review of Toshiba’s book-keeping. (Reuters)