(From Nikkei Asian Review)
Constant management pressure to meet profit targets as well as a top-down corporate culture that demanded blind loyalty were the underlying causes of accounting irregularities at Toshiba, an independent panel concluded in a report Monday.
Top management and the heads of in-house companies acted on “the shared goal of padding nominal profits,” the report said. President Hisao Tanaka and immediate predecessor Norio Sasaki, now vice chairman, denied intentionally delaying loss-booking, but those who worked below them thought they were being instructed to do so, according to the report.
Top management would assign “challenges,” or earnings improvement targets, at monthly meetings with the heads of in-house companies and subsidiaries. These targets were especially aggressive in fiscal 2011 and fiscal 2012, when Sasaki was president. In-house company chiefs felt enormous pressure to meet the goals, the committee concluded.
Booking future profits in advance and postponing losses only exacerbated the book-padding the following year. “The profit-first principle that became dominant after the Lehman shock led to” the practices, a former Toshiba employee said.
Toshiba’s sales, which had topped 7 trillion yen ($55.8 billion) before the financial crisis, sank to the high 5 trillion yen level at one point as its mainstay semiconductor business suffered. Its other field of focus, nuclear power, also languished after the 2011 Fukushima plant accident led to construction freezes in Japan and abroad. With its future path unclear, Toshiba focused more on short-term profits than developing operations. Read more