Toshiba’s chief executive and president Hisao Tanaka has resigned after the company said it had overstated its profits for the past six years.
He will be succeeded by chairman Masashi Muromachi, with vice-chairman Norio Sasaki also stepping down.
On Monday, an independent panel appointed by Toshiba said the firm had overstated its operating profit by a total of 151.8bn yen ($1.22bn, £780m).
The overstatement was roughly triple an initial estimate by Toshiba.
‘Deeply apologise’
“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,” the company said in a statement.
“Because of this Hisao Tanaka, our company president, and Norio Sasaki, our company’s vice chairman… will resign today.”
Mr Tanaka, 64, and Mr Sasaki, 66, both joined Toshiba in the early 1970s.
Mr Sasaki served as Toshiba president between June 2009 and June 2013, covering most of the period during which the firm inflated the profits.
‘Very regrettable’
Toshiba’s accounting scandal began when securities regulators uncovered problems as they probed the company’s balance sheet earlier this year.
The findings mean Toshiba will have to restate its profits for the period between April 2008 and March 2014. It is unclear whether it will affect the company’s results for the year ending March 2015.
History of Toshiba:
- Hisashige Tanaka establishes Tanaka Engineering Works in 1873 to develop telegraphic equipment at the request of the Japanese government.
- in 1890 Ichisuke Fujioka establishes Hakunetsu-sha to manufacture light bulbs in Japan.
- In 1893 Tanaka Engineering Works changes its name to Shibaura Engineering Works.
- in 1899, Hakunetsu-sha changes its name to Tokyo Electric Company.
- Between 1891 and 1931 the two firms pioneer the development of electrical equipment in Japan.
- Between 1932 and 1939 Shibaura Engineering Works and Tokyo Electric Company take cross-shareholdings and collaborate in a number of areas.
- In 1939 the two companies merge to form Tokyo Shibaura Electric.
- During World War 2 the company grows rapidly by filling state orders for radios, vacuum tubes and other military supplies, and also producing generators.
- Following the end of the war and rapid expansion of the Japanese economy the Tokyo Shibaura Electric expands into new areas and overseas territories.
- In 1984, the abbreviated form “Toshiba” replaced Tokyo Shibaura Denki as the company’s official name (in English, “Toshiba Corporation” was adopted in 1983).
The finance minister, Taro Aso, said the case could undermine confidence in corporate governance in Japan.
He added the accounting irregularities at Toshiba were “very regrettable”.
Japan’s government has been trying to regain global investors’ confidence with better corporate governance after Olympus was found to have covered up $1.7bn in losses in late 2011, in what was until now Japan’s worst corporate governance scandal.
‘Corporate culture’
The report’s findings are expected to lead to the restatement of earnings, a board overhaul and potentially hefty fines for Toshiba.
The inquiry found that the misreporting of profits began after the financial crash seven years ago, when senior managers began imposing unrealistic performance targets.
“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.”
Regulators are believed to be starting their own review of Toshiba’s book-keeping, based on Monday’s report.
Shares in Toshiba rose 6% in Japan as the report into the accounting problems ended speculation as to the extent of the problem.
However, Toshiba’s shares are still down by about a quarter since the company first disclosed cases of accounting irregularities in April.
Source: https://www.bbc.com
