Hisao Tanaka, Toshiba's President and CEO, stepped down due to a $1.2 billion profit scandal. An independent investigation claims that Tanaka was aware of the company's inflated profit.
Toshiba's profit inflation scandal is one of the biggest corporate scandals in Japan's business history. During a press conference, Tanaka announced that he will be stepping down and Masashi Muromachi, the current Chairman of Toshiba, will replace him temporarily. The company will also appoint new directors and about 50 percent of them will be from outside the company.
"I see this as the most damaging event for our brand in the company's 140-year history," said Tanaka during a news conference. "I don't think these problems can be overcome overnight."
Toshiba is planning to announce delayed financial results for the fiscal year ended in March.
Tanaka is not the only top Toshiba executive who has stepped down. Norio Sasaki, the Vice Chairman of the company, is also stepping down. The independent report alleges that Sasaki was also aware of inflated profits of the company since 2008.
Toshiba is said to have overstated its operating profit by 151.8 billion yen, or $1.22 billion, over the last few years.
The report added that executives like Sasaki and Tanaka pressurized divisions in the business to meet touch targets. The executives were also aware that the divisions were overstating the profits and also delaying to report the losses. Toshiba is blamed to have a working culture where subordinates cannot go beyond the wishes of seniors.
Tanaka denies that he gave orders to misappropriate accounts; however, such observations were made by the independent report.
Misappropriation may see Japanese authorities imposing hefty fines on Toshiba.
Taro Aso, the Finance Minister of Japan, also expressed his regret over the latest Toshiba profit scandal. Aso says that unfortunately the scandal has come to light at a time when Japan is trying to win the confidence of international investors.
"If (Japan) fails to implement appropriate corporate governance, it could lose the market's trust," per Aso.
The finance minister has declined to make a statement if Toshiba will be hit with a financial penalty.
The restatement of Toshiba's profit may result in the company's credit rating to be downgraded, says Standard & Poor's, an international rating agency.
Photo: Michael Rehfeldt | Flickr
