Business / Corporate

Toshiba president to quit amid 'padded profits' inquiry

Kyodo, Staff Report

Toshiba Corp. President Hisao Tanaka is expected to step down to take responsibility for accounting irregularities, sources familiar with the matter said Saturday.

Tanaka’s resignation will be finalized after a third-party panel tasked with investigating the scandal releases its report as early as next week. The panel has found the 64-year-old president put heavy pressure on subordinates to achieve profit targets, the sources said.

Sources say the electronics maker may have overstated around ¥200 billion ($1.6 billion) in its group operating profits in its mainstay infrastructure-related, semiconductor, television and personal computer businesses for the five years to March 2014.

Former President and current Vice Chairman Norio Sasaki, 66, is also likely to resign as a board member over the scandal, the sources said.

Sasaki served as Toshiba president between June 2009 and June 2013, covering most of the period during which the company has been found to have padded its profits.

Toshiba has withdrawn its earnings estimate for fiscal 2014, which ended in March, and canceled a year-end dividend. It is expected to release an earnings report in August following the release of the third-party-panel investigations as early as next Friday.

Informed sources said Tanaka placed intense pressure on his subordinates to meet profit targets, potentially driving them to pad figures.

He made phone calls and sent emails to subordinates early in the morning in some cases, demanding they improve business performance, the sources said, adding that some exchanges could be taken as calling for irregular accounting.

Toshiba also called its profit targets a “challenge” or “stretch,” with the latter apparently used to describe more ambitious targets, they said.

The third-party panel formed to investigate accounting irregularities is expected to look into whether Tanaka’s predecessor Sasaki played any role in causing the scandal. Sasaki had a similar management style, and is believed to have also pressed subordinates to achieve profit targets while company president. The sources said he sometimes pressed them hard with exhortations such as, “Why can’t you just get it done?”

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