Toshiba’s CEO quits

Given the accounting scandal that came to light concerning the doctored books that inflated profits at Toshiba, the Japanese technology manufacturer by 152 billion yen ( $1.59 billion Cdn ) over several years, Hisao Tanaka – the company’s CEO – announced his resign on Tuesday. Toshiba said it will reorganize its corporate governance which means that 8 of the 16 in total board members are stepping down. One of them is obviously the CEO, Mr. Hisao Tanaka along with Norio Sasaki, who has been serving a vice chairman.

Toshiba Corp. acknowledged that there was systematic cover-up, which began 7 years ago, in 2008. Various parts of the Japanese company’s sprawling business including computer chips and personal computers were struggling financially, but top managers set unrealistic earnings targets under the banner of “challenge,” and subordinates faked results.

On top of its struggles in electronics, Tokyo-based Toshiba’s prospects in nuclear power, one of its core businesses, were shaken after the 2011 Fukushima disaster set off public fears about reactor safety, making new nuclear plants unlikely in Japan. All 48 of the nation’s working reactors are now offline.

As it is being confirmed by the company, the current chairman, Masashi Muromachi will take the CEO’s duty and help re-establish a new regime while the Japanese company investigates the sale of other assets to find the amount which is required to cover the issues that have surfaced.

Tanaka and Sasaki originally intended to resign in the coming months but their ousting was announced soon after a government minister said the scandal could damage international confidence in Japanese business.

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 ( £1.1bn ) of losses over 13 years.

Toshiba has repeatedly apologized to shareholders and customers. It has set up an outside investigation group to analyse why the scandal happened and propose what needs to be done to prevent a recurrence.

The inflation of profits to meet targets was carried out not only on one or two projects, but across the board, sometimes because the projects weren’t even breaking even, according to the report of an investigation.

“There was intense pressure to produce results under the challenge initiative,” the report said. “So employees felt cornered into resorting to inappropriate measures.”

It seems that the harm is done and now the company will get some time to get back on track. We only hope it all works out for the best from now on and Toshiba will soon be able to make a dynamic come back. Because let’s not forget, the more the competition, the more the innovations and breakthroughs. And Toshiba is truly a company that has contributed to numerous technological industries.

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