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Accounting scandal forces Toshiba CEO to resign

Posted: 22 Jul 2015 ?? ?Print Version ?Bookmark and Share

Keywords:accounting scandal? operating profit? semiconductor components?

An independent investigation committee released a report revealing the worst accounting scandal in Toshiba Corp.'s 140-year history, which pushed its CEO to finally resign.

The committee reported to Toshiba on Monday that the company had overstated its operating profits by 151.8 billion yen (about $1.22 billion) cumulatively over the period covered by the fiscal years 2008 to 2014.

Toshiba as a vertically integrated conglomerate makes semiconductor components, personal computers, televisions and up to nuclear power plant. The misstating of accounts appears to have been born of managerial pressure placed on operating companies and affects the PC, visual products and semiconductor business units.

The company has apologized repeatedly to shareholders, customers, business partners and others affected by the scandal. "Going forward, we will renew our commitment to our original management policy, which puts the highest priority on human life, safety and compliance," the company said in a statement. The company also said it would examine measures to prevent such events happening again and implement them thoroughly.

Japanese reports in recent days have said that Norio Sasaki, vice chair of the company's board of directors, and a previous company CEO, is anticipated to resign if the report concludes that Toshiba has been overstating its profits. Toshiba's present president and CEO Hisao Tanaka took office in 2013, succeeding Sasaki.

As a result of the investigation Toshiba is expected to reduce its stated profits by between about $1.4 billion and about $1.6 billion for the five years up to and including the fiscal year that ended March 2014, according to The Nikkei Asian Review, without referencing a source for the information.

On Tuesday, as expected, Tanaka resigned along with his predecessor Sasaki. Tanaka was replaced temporarily by Toshiba chair Masashi Muromachi, according to reports.

More than half of the directors of the company could be forced to quit so that outside directors could be appointed to try and effect a culture change within Toshiba, the same reports said.

The scandal is likely to lead to restatements of accounts and possible fines, and is the worst board-room scandal since it was discovered in 2011 that optical specialist Olympus Corp. had hidden $1.7 billion of losses and other dubious fees and payments in a cover-up that dated back to the late 1980s.

- Peter Clarke
??EE Times Europe

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