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Toshiba CEO resigns over accounting scandal

Article By: ,  Financial Analyst
July 21, 2015 6:36 PM

Toshiba's chief executive Hisao Tanaka has resigned after it emerged the company overstated its profits for the past six years. He will be replaced by chairman Masashi Muromachi. Along with the chief executive, several senior managers resigned over the allegations.

"It has been revealed that there has been inappropriate accounting going on for a long time, and we deeply apologise for causing this serious trouble for shareholders and other stakeholders," the company said in a statement.

"Because of this Hisao Tanaka, our company president, and Norio Sasaki, our company's vice chairman… will resign today."

"I apologize from my heart to all our stakeholders," Hisao Tanaka, said at a news conference at Toshiba’s headquarters today (July 21st). He acknowledged that the company had engaged in "inappropriate accounting" but said it had not done so intentionally, and that he had not told subordinates to exaggerate the profitability of their divisions.

A £780 million overstatement 

On Monday, an independent panel appointed by Toshiba said the firm had overstated its operating profit by a total of 151.8 billion yen (£780 million). It found problems in all areas of its business, from computers to nuclear power plants.

The committee revealed it had discovered "systematic involvement, including by top management, with the goal of intentionally inflating the appearance of net profits." It added that Toshiba financial officials had "deliberately provided insufficient explanations to auditors, with the intention of carrying out a systematic cover-up."

The report states the problems started after the global financial crisis in 2008, with top executives insisting that managers meet targets despite the drop in demand. "Under pressure, many resorted to accounting gimmicks and shortcuts", the committee said.

Following the scandal, Toshiba will have to restate its profits for the period between April 2008 and March 2014.

Shares of the company have dropped around 20 per cent since early April when the accounting issues came to light. The company's market value is standing at around 1.673 trillion yen.

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