3 Toshiba execs quit over $1.7b scandal

Toshiba president Hisao Tanaka (centre), chairman Masashi Muromachi (left) and executive officer Keizo Maeda bowing during a press conference yesterday at the company's headquarters in Tokyo. Three executives resigned to take responsibility for a US$
Toshiba president Hisao Tanaka (centre), chairman Masashi Muromachi (left) and executive officer Keizo Maeda bowing during a press conference yesterday at the company's headquarters in Tokyo. Three executives resigned to take responsibility for a US$1.2 billion accounting scandal.PHOTO: EUROPEAN PRESSPHOTO AGENCY

TOKYO • Toshiba president Hisao Tanaka has resigned to take responsibility for a US$1.2 billion (S$1.7 billion) accounting scandal that caused the company to restate earnings for more than six years.

Vice-chairman Norio Sasaki and adviser Atsutoshi Nishida, a former president, have also resigned, the Tokyo-based company said yesterday, more than two months after announcing it was investigating possible accounting irregularities.

The maker of nuclear reactors, chips and appliances said earlier in the day that it would correct earnings by at least 152 billion yen (S$1.7 billion), based on the results of a third-party investigation of its books.

The resignations come after the report showed top executives set unrealistic profit targets that systematically led to flawed accounting.

Chairman Masashi Muromachi will take over as interim president, Toshiba said. The company will announce a new management team in mid-August and will file its fiscal year 2014 earnings on Aug 31.

Mr Muromachi will take on the role "as a temporary measure", Mr Tanaka said in a news conference.

Toshiba, a 140-year-old pillar of Japan Inc, is caught up in the country's biggest accounting scandal since 2011.

The scandal began when securities regulators uncovered problems as they probed the company's balance sheet earlier this year.

"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."

Mr Tanaka and Mr Sasaki, who between them have led the company for the past six years, sought to delay booking losses and staff were unable to go against management orders, according to the report.

The accounting irregularities were "skilfully" hidden from outside observers, according to the investigation. No charges have been filed against Toshiba or its executives in the case.

Toshiba shares surged 6.1 per cent, the most since June 2013, to 399.90 yen at the close of Tokyo trading yesterday.

The stock has declined 17 per cent since Toshiba initially announced its accounting probe on May 8 this year, compared with a 7.6 per cent gain for the Nikkei 225 Stock Average.

"The numbers are out and investors have no further reasons to sell for the moment, so we are seeing some repurchasing momentum," Ichiyoshi Asset Management executive officer Mitsushige Akino told Bloomberg News.

The embarrassing findings come less than two months after the country adopted a long-awaited corporate governance code that backers hoped would usher in a new era of transparency for shareholders in Japanese firms.

Toshiba - best known for its television sets and electronics, including the world's first laptop personal computer and DVD player - 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 panel report said.

Toshiba is considering selling assets including securities it owns and real estate to raise money, the company said yesterday.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on July 22, 2015, with the headline '3 Toshiba execs quit over $1.7b scandal'. Print Edition | Subscribe