Wednesday, July 29, 2015

Toshiba Told Tall Tales About Profit

This could herald the collapse of the world economy. 

If companies are not honest with themselves....

"Toshiba, the Japanese industrial giant, overstated its earnings by more than $1.2 billion over seven years. Discrepancies detailed Monday by a committee of independent experts hired by the company point to a problem that reached the upper echelons of Toshiba. CEO Hisao Tanaka (left) and his predecessor, Norio Sasaki, now vice chairman, plan to announce their resignations on Tuesday, Japanese media reported. The problems, the experts said, date back to the 2008 global financial crisis, when managers began taking accounting shortcuts to meet increasingly difficult profit goals. The committee accused Toshiba of breeding “a corporate culture where it is impossible to go against one’s bosses’ wishes” and said the company’s most senior leaders were aware of some of the misleading accounting and that the accounting department “deliberately provided insufficient explanations to auditors, with the intention of carrying out a systematic cover-up.” Toshiba did not dispute the findings but said it would not address them until Tuesday."

"Toshiba’s CEO quits amid scandal over phony profits; Move sullies image of Japanese icon" by Jonathan Soble New York Times  July 21, 2015

TOKYO — Few companies in Japan have conveyed respectability like Toshiba, the sprawling industrial conglomerate that, to the surprise of many here, has found itself at the center of one of the country’s largest accounting scandals.

Is it?

Toshiba’s chief executives have for decades sat at the apex of Japan’s establishment — civic leaders as much as business managers, in many people’s eyes. One boss from the 1990s later ran the Tokyo Stock Exchange, then the national postal system. Toshiba was considered a paradigm of a firm that combined profitability with clean, modern corporate governance.

On Tuesday, in defiance of that image, the chief executive and two of his predecessors resigned, along with several lesser executives, over accusations they drove the company to overstate its earnings by $1.2 billion over the last seven years.

At least they didn't lie. They just overstated.


In April, the company, prompted by an investigation by financial regulators, said it was examining possible accounting inaccuracies in one of its divisions. An internal investigation initially found tens of millions of dollars of bookkeeping discrepancies — and the amount quickly ballooned.

On Monday, a committee of independent experts hired by Toshiba said it had found an additional $1.2 billion of overstated earnings. There were problems in virtually all corners of its business, which encompasses products ranging from refrigerators to nuclear power plants.

Senior executives were singled out for blame. The committee said it had discovered “systematic involvement, including by top management, with the goal of intentionally inflating the appearance of net profits.” Toshiba financial officials, it said, had “deliberately provided insufficient explanations to auditors, with the intention of carrying out a systematic cover-up.”

At a news conference, chief executive Hisao Tanaka bowed deeply in a show of remorse. “I apologize from my heart to all our stakeholders,” he said.

He acknowledged that the company had engaged in “inappropriate accounting” but said it had not done so intentionally. He said he had not told subordinates to exaggerate the profitability of their divisions.

Toshiba said it was only beginning to look at ways to reshape the company to prevent a recurrence. As a first step, the company said it would put one of its other independent directors, Hiroyuki Itami, in charge of its audit committee.

Critics, including the investigating panel, have pointed to the fact that the committee had been headed by longtime Toshiba insiders.

The Toshiba scandal has raised questions about efforts by the Japanese government to improve corporate governance and culture....

And an$wered them, too.


In the olden days they would have committed seppuku for such dishonor.

UPDATE: Motorola targets the thrifty with new Android phones