Toshiba Chief Resigns Over Accounting Scandal

The chief executive of Toshiba has resigned following the release of an independent inquiry that found he had been aware of a profit inflation scheme going back to 2008.

The report by an independent panel appointed by the Japanese firm said the company had overstated operating profits by a total of 151.8 billion yen (£780m), roughly triple the figure Toshiba had initially estimated.

‘Inappropriate accounting’

“It has been revealed that there has been inappropriate accounting going on for a long time, and we deeply apologise for causing this serious trouble for shareholders and other stakeholders,” said Toshiba.

The scandal is Japan’s biggest since Olympus was found in 2011 to have covered up $1.7 billion (£1bn) in losses, and comes at a time when the government is introducing measures designed to improve corporate governance.

Hisao Tanaka, Toshiba’s chief executive and president, said he will be temporarily succeeded by chairman Masahi Muromachi, and added the company is considering appointing outside directors to more than half of its board seats.

Two other executives, vice chairman Norio Sasaki and adviser Atsutoshi Nishida, both of whom are Tanaka’s predecessors as chief executive, also said they would resign after the report found they were aware of the profit overstatements. A total of eight high-level Toshiba executives have now resigned over the matter.

‘Most damaging event’

“I see this as the most damaging event for our brand in the company’s 140-year history,” Tanaka reportedly told a news conference. “I don’t think these problems can be overcome overnight.”

Toshiba plans to announce its delayed financial results for the full year ended in March, and is expected to restate its earnings between April 2008 and March 2014, as well as overhauling its board and possibly to pay large fines.

Japan’s finance minister, Taro Aso, on Tuesday called the accounting irregularities “very regrettable” and said at a press conference that Japan risks losing “the market’s trust” if it doesn’t implement appropriate corporate governance. He didn’t comment on whether Toshiba would face a financial penalty, but the government is reportedly preparing its own review of the company’s finances.

Prime minister Shinzo Abe recently introduced new guidelines to improve corporate governance.

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