Toshiba’s top executives were involved in “systematically” inflating profits by $1.2 billion over several years, an independent panel said Monday, in a stinging indictment of one of Japan’s best-known firms.
Current President Hisao Tanaka and his predecessor are both expected to resign over the profit-padding scandal after investigators uncovered irregularities stretching back to 2008.
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.
“Toshiba had a corporate culture in which management decisions could not be challenged,” it added, ahead of the release of the full report on Tuesday.
Toshiba’s accounting scandal, one of the most damaging to hit Japan in recent years, began when securities regulators uncovered irregularities as they probed the company’s balance sheet earlier this year.
The findings released Monday mean Toshiba will have to restate its profits by 151.8 billion yen for the period between April 2008 and March 2014. It is unclear whether it will affect the fiscal year ending March 2015.
“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.”
Best known for its televisions and electronics, including the world’s first laptop personal computer and DVD player, Toshiba has more than 200,000 employees globally and also operates in power transmission and medical equipment.
Among the divisions affected by the inflated profits are the infrastructure, audio-visual and semiconductor businesses, the summary said.
– Shares dive –
Tanaka is reportedly expected to resign on Tuesday over the scandal, while Norio Sasaki, who served as Toshiba president between June 2009 and June 2013 — covering most of the period during which the company inflated the profits — is also expected to step down.
“I express sincere apologies to our shareholders and all other stakeholders… and assure you that we will make every effort to restore your trust,” Tanaka said in an earlier statement.
In May, Toshiba warned over the ballooning accounting “irregularities” and yanked its earnings forecast — a 120 billion yen net profit on sales of 6.7 trillion yen — for the past fiscal year.
The embarrassing findings come less than two months after Japan adopted a long-awaited corporate governance code that backers hoped would usher in a new era of transparency for shareholders in Japanese firms.
Toshiba shares have lost more than 20 percent since May as questions mounted over the extent of the problem and who was responsible.
The Securities and Exchange Surveillance Commission may ask the government to slap Toshiba with penalties over the scandal, the Yomiuri newspaper said.
The affair comes two years after a trio of former Olympus executives were handed suspended jail terms after being accused of engineering a $1.7 billion accounting fraud at the camera and medical equipment maker.
Olympus itself was fined 700 million yen for its role in the affair, which badly damaged Japan’s corporate governance image and turned the company’s first foreign leader into a high-profile whistleblower.