The major accounting scandal at Toshiba Corp. has led to an extraordinary situation in which eight of its 12 board members (not including outside directors) resigned to take responsibility for the padding of the group's profits by roughly ¥150 billion in its business years from 2008 to 2014. However, it remains to be seen if the exit of the top executives — including the president and his predecessor — will change what a third-party probe described as the firm's corporate culture behind the massive illicit accounting.
It's also not clear if Toshiba has come to grips with the problem. In a report released on Monday, an independent panel of lawyers tasked to probe the accounting irregularities concluded that inappropriate accounting practices went on for years "in a systematic manner" in many of its business divisions based on the "involvement of the top management." According to the panel, its probe of in-house communications at the firm revealed that Toshiba had a "corporate culture" in which the employees were unable to go against the wishes of their superiors, and determined that its top executives — president Hisao Tanaka and his two predecessors, vice chairman Norio Sasaki and adviser Atsutoshi Nishida — forced the division managers to engage in improper accounting to inflate the profits by adding strong pressures on them to meet the profit targets.
Tanaka, who apologized for the scandal in a news conference on Tuesday, still denied that he put pressure on the division managers to pad the profits, saying that he did not realize he was telling the managers to manipulate the accounting. According to the panel, profits at most of Toshiba's major business divisions including infrastructure, personal computers and semiconductors were padded through such acts as understating and deferring costs or failing to report appraisal losses on inventories in accordance with falling prices. While Tanaka described the scandal as the "biggest damage" to Toshiba's brand image in its 140-year history, it's not clear if the company has a clear idea as to how to correct the corporate culture that caused the problem — which might not have come to the fore if a whistleblower had not tipped off the Securities and Exchange Surveillance Commission — and to ensure that the problem will not be repeated.