Toshiba’s boss has quit the Japanese electronics conglomerate over a 152bn yen (£780m) accounting scandal that the government said threatened to undermine investors’ confidence in the country.
Hisao Tanaka, the company’s president and chief executive, will be replaced by Toshiba’s chairman, Masashi Muromachi, on Wednesday. Tanaka’s predecessor, Norio Sasaki, who is vice-chairman, will also leave.
Toshiba overstated its operating profits over several years in accounting irregularities involving its top management, independent investigators said on Monday.
Tanaka and Sasaki knew about the profit overstatement and created a pressurised corporate culture that prompted business heads to manipulate figures to meet targets, the investigators found.
Sources had initially said Tanaka and Sasaki would resign in the coming months but their ousting was announced soon after a government minister said the scandal could damage international confidence in Japan’s business practices.
The Japanese finance minister, Taro Aso, said: “If [Japan] fails to implement appropriate corporate governance, it could lose the market’s trust. It’s very regrettable.”
Japan has been trying to demonstrate improved corporate governance after it was revealed in late 2011 that Olympus, another of the country’s biggest names, had hidden $1.7bn of losses over 13 years.
Improper accounting included overstatements and booking profits early or pushing back the recording of losses or charges. Those actions often resulted in still higher targets being set for business divisions in the following period.
“This led to a need to carry out improper accounting on an even bigger scale, and as this was repeated, the scale of the inappropriate book-keeping also expanded,” the investigators’ report said.
Toshiba, whose products range from laptops and televisions to nuclear power plants and railway systems, is one of the fixtures of the Japanese corporate scene.
Despite its shares losing more than a quarter of their value since the irregularities surfaced in April, it is still Japan’s 10th biggest company by market value. It was created by a merger in 1938 but its roots date back to 1875 and it was one of the companies that turned Japan into an industrial power.
One of the investigators’ early theories was that top managers set unrealistic targets for new operations such as smart meters and electronic toll booths because they were worried about the impact of the 2011 Fukushima disaster on Toshiba’s nuclear division.
The report did not mention Fukushima but it said pressure within Toshiba was particularly strong in the accounting years 2011 and 2012.
The report said much of the improper accounting, which stretched back to 2008, was intentional and would have been difficult for auditors to detect.