Company promises governance overhaul and calls for extraordinary shareholder meeting
Toshiba’s chief executive and president, Hisao Tanaka, has resigned after an independent panel announced the company had overstated its operating profit by about $1.2 bn since the financial crisis.
Vice chairman Norio Sasaki and company adviser Atsutoshi Nishida, both of whom have served as CEO since 2009, followed Tanaka’s lead and resigned to accept blame for the accounting problems under their leadership.
Tanaka and Sasaki had planned to resign in coming months but this was brought forward after Japanese finance minister, Taro Aso said the scandal could hit international confidence in Japanese businesses. ‘If [Japan] fails to implement appropriate corporate governance, it could lose the market’s trust. It’s very regrettable,’ he told a news conference on Tuesday, according to media reports.
Chairman Masashi Muromachi will take over as interim president.
The resignations follow a report by the independent panel that the company’s leaders set unrealistic earnings targets in the wake of the 2008 financial crisis and accounting irregularities were hidden to help meet them. The panel says both Tanaka and Sasaki were aware of the overstatements before the investigation.
‘The company takes the situation it has caused very seriously and we deeply apologize to our shareholders, investors and all other stakeholders,’ Toshiba says in a statement. ‘The company will thoroughly analyze and examine the investigation results and recommendations received from the independent investigation committee, and reflect them in our management practices, as well as examine measures to prevent recurrences.’
Toshiba promises to take several steps to clarify circumstances surrounding the overstatement and to prevent similar incidents in the future, including investigating the accounting irregularities to determine the names of all people responsible.
It says it will also create a ‘management revitalization committee’ to devise a new management structure and reform the company’s governance. The committee is based on a recommendation by the independent panel that the company ‘establish a strong internal control function, strengthen the auditing function, and increase the number and redefine the roles of outside directors.’
Toshiba says it will also announce further penalties for directors and executive officers by the end of the month, communicate further changes to the managerial team by the middle of August and convene an extraordinary shareholder meeting.
