The Toshiba Accounting Scandal: An Overview
Written and Edited By Evan Markovitz
Recently, it was revealed that the Toshiba corporation had been inflating quarterly profits for nearly the last five years. The scandal reached the executives of the company. Due to the seriousness of the scandal, most executives, including the CEO, Hisao Tanaka, resigned from their positions in the company.
Why Is Toshiba Important?
Toshiba is one of the biggest technology companies across the world. They are also highly respected in Japan as being a trustworthy company as well. Their company expands into four different sections: Digital Product's, Electronic Devices, Home Appliances, and Social Infrastructure. They are constantly involved in changing the lives of the public. With this scandal there is high possibility in loss of revenue and respect from the public.
Where did it originate?
The scandal started a little over five years ago. When the then quarter’s profits were lower than what was needed. The company filed a report that stated they had made more money than they really did. It is important to realize that this issue started at the top of the corporate chain. "There existed a corporate culture at Toshiba where it was impossible to go against the boss' will," the report said. It highlighted "a systematic involvement including by top management" and "a deliberate attempt to inflate the appearance of net profit."(Business Insider) This continued for years and increased after the massive earthquake in Japan in 2011. Until recently it stayed a secret, but an external investigation was conducted with regards to the company's profits. It was discovered that Toshiba had been lying for years. Jim Edwards, an editor from Business Insider ,said that “a report by independent investigators released on Monday said Toshiba had overstated its operating profit by 151.8 billion yen ($1.22 billion) over several years, roughly triple Toshiba's initial estimate. Tanaka and his predecessor, Sasaki, were aware of the overstatement of profits, it said.”
What’s the public’s reaction?
The general public, along with the company's stockholders, have become worried about the technology giant. Soon after the news broke, stock prices fell slightly and public opinion swayed away from the corporation. The worldwide technology community is worried about the future credibility of the company. As well as the new management coming in and are not quite sure if the new management, many of whom are coming from outside the company, will be a good for for the company.
Why should you, the public, care?
Much of our world is run by highly complicated technology that is created and imported from Japan, and Toshiba happens to be the biggest center for technology development in Japan. Should the company’s 140 year run in the technology industry come to an end, much of the world’s future technology could come at a slower pace and from a lesser known and trusted company.
Equipment ranging from the smallest computer chip to a household refrigerator is being produced at this moment by Toshiba. Should the company's potential new management fail to keep Toshiba in high graces with the world economy and general population, product's that we commonly use will become more scarce and higher in price due to one less seller on the market limiting the sale for those product's.
How is the company reacting to the scandal?
After the report inflation was revealed, many of the company's executives took it upon themselves to resign from the company. The list of people who resigned includes many higher ups, including the CEO of Toshiba himself. The CEO released a statement apologizing for what he and his coworkers had done to the company and for tarnishing its name. The executives who stayed have decided to hire replacements from outside the company to ensure there is no influence from the scandal and executives that left the company. Yuri Kageyama, a writer for the Huffington Post, quoted the CEO’s reaction, “Bowing deeply before flashing cameras at a news conference, CEO Hisao Tanaka kept his head lowered for nearly half a minute in a gesture meant to convey deep shame and contrition. Tanaka's predecessors, Norio Sasaki, now a vice chairman, and Atsutoshi Nishida, an adviser, also gave up their posts along with six other executives.”
Who has been discussing this?
Many news outlets have taken time to discuss the controversy, but have not shared a bias to the company one way or the other. The news outlets that have discussed this include: Business Insider, Huffington Post, and various other companies and bloggers. However, many of the bloggers who discuss this topic are often biased due to their individuality compared to the mainstream press organizations. The mainstream press, as stated earlier, refrain from sharing a bias to the company. In terms of credibility, much of the individual bloggers are not credible as sources, whereas the mainstream news outlets are nationally recognized and are very reliable.
As it currently stands, the corporation is still in good standing. There is still a lot of uncertainty around the new management. Most of the potential new hires will be coming from outside the company. Many are skeptical that due to the outside “talent” coming in, the company will change drastically, for better or for worse. It is not clear what will happen to the company. Only time will tell.
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