President of Toshiba Corporation, Hisao Tanaka, is going to
announce his stepping down this afternoon. The third party committee for
investigation of false financial management submitted the final report to
Toshiba, which revealed inappropriate involvement of top managers in
fabrication of its financial balance. One of the major appliance companies in
Japan is facing fatal loss of credibility from the public on its moral
standard.
According to the investigation report, total amount of
income falsely added to the balance was ¥152 billion. The committee found that
top leaders of Toshiba did not make any effort to stop that false financial
management, while they had noticed fictitious income being accumulated.
Although some sections demanded allowance for deficits, top leaders had been
rejecting it. After all, the false accounting was conducted by top leaders
including the president.
The president of Toshiba gave each section monthly workload,
called “challenge.” When a section could not achieve the goal, it would receive
hard pressure from the top, including possible withdrawal from a project. The
management board ignored a recommendation to reconfirm the rightness of
management from the audit committee. “There has been a corporative climate in
Toshiba, in which the workers could not resist preference of their leaders,”
told the final report.
Toshiba falsely added ¥26 billion of income in the sales of gauge
for electric power usage to Tokyo Electric Power Company, in spite of possible
deficit amounting to ¥8 billion had been realized. President Tanaka dismissed
an offer from project team to include allowance for the deficit. In the sales
of television, Tanaka also recognized false accounting. The TV section of
Toshiba had been capitalizing the cost for advertisement with certain delay or
added imaginary discount in purchasing TV parts.
Security and Exchange Surveillance Commission is going to
investigate the false accounting of Toshiba. The commission will decide whether
it is going to recommend Financial Services Agency to pose penalty on Toshiba,
after Toshiba releases security report in late August. The commission is making
a close look at whether Toshiba’s false accounting affected its stock price.
Toshiba has not only been making family appliances, such as
refrigerator, television or laptop computer, but also exporting reactors for
nuclear power plant. In the competition with the companies in China or South
Korea, Toshiba was impatient in lagging behind. But, the scandal may cause
significant loss of credibility to Japanese company, which once enjoyed
splendid reputation in the world.
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