Risk & Compliance

Toshiba Chief Apologizes for Accounting Crisis

Five years of overstated profits anger investors and elicit the company's vow to "create a new Toshiba."
Matthew HellerJune 25, 2015

Toshiba president Hideo Tanaka vowed Thursday to “create a new Toshiba” in response to an accounting scandal that he called the worst crisis in the company’s history.

In April, Toshiba launched an internal investigation of accounting irregularities that involve nearly 55 billion yen ($445 million) in overstated profits for the five years ended March 2014. Because of the probe, the company has been unable to report results for the fiscal year that ended in March 2015 and scrapped its year-end dividends.

At the general shareholders meeting on Thursday, Tanaka apologized to angry investors “from the bottom of my heart,” describing the scandal as “the biggest crisis facing our company” since it was founded 140 years ago.

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“We need to create a new Toshiba so something like this will never happen again,” he said.

Tanaka pledged that the company will take preventive measures and strengthen governance to address the crisis, for example by increasing the number of outside directors. “We will work to transform our management and culture to once again become an honest and trustworthy company,” he said.

During the meeting, The Financial Times reports, shareholders asked why external directors and auditors were unable to spot discrepancies in profit figures.

“Everyone should be replaced,” one shareholder told Tanaka. “I have worked at Toshiba for 40 years but I have never seen the company in such a pitiful state. I am so ashamed.”

Toshiba said initially that an internal probe had found construction costs on certain infrastructure-related projects had been underestimated and that losses from the construction work were “not recorded in a timely manner.”

The inquiry was later expanded to cover Toshiba’s television, personal computer, and chip-making divisions. It has so far found 21 cases of improper accounting.

Japan’s securities watchdog is expected to decide whether to seek disciplinary steps against the company after receiving a final report from Toshiba. The company plans to hold an extraordinary shareholders meeting after the investigation panel releases the report.

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