Energy and electronics giant expects net loss for fiscal year.
August 19, 2015
by ASSOCIATED PRESS
TOKYO — Japanese energy and electronics giant Toshiba Corp. has revamped its leadership lineup and is forecasting a net loss in the current fiscal year as it cleans up problems with its accounting and corporate governance.
The Tokyo-based maker of products ranging from submarine systems to semiconductors plans to trim its board of directors to 11 from 16 members, while appointing a majority of outsiders to help improve oversight.
The problems at the 140-year-old company have underscored the persisting weaknesses in Japanese corporate management. The government has been pushing companies to beef up their governance and be more accountable to their shareholders, with mixed results.
“Amid the biggest crisis facing Toshiba in 140 years since our founding, we need to improve corporate governance, internal controls and our corporate culture,” the Kyodo News Service quoted Masashi Muromachi, who will cede his post as chairman to be the company’s president, as saying.
Toshiba’s shares jumped 6.2% early Aug. 19, after the reshuffle was announced late the day before. The plan needs shareholder approval.
A probe by an outside panel reported in July that it found extensive underreporting of project costs and losses in many divisions in a scandal that prompted the resignations of former President Hisao Tanaka and two other executives.
Muromachi had been named interim president after Tanaka stepped down.
Toshiba said it will record an asset devaluation loss of 127 billion yen ($1 billion) and 48 billion yen ($386 million) in costs due to the scandal.
The report by the investigation committee into the accounting problems outlined many instances of company officials underreporting costs, delaying reports of losses and other abuses including “channel stuffing,” or inflating sales figures by putting more products into a distribution channel than it can sell.
In many cases it attributed the missteps to worries that upper management would not accept the losses and to lax internal controls. No charges have been filed related to the problems, which date back more than six years.
Japanese corporate culture, with its emphasis on hierarchy and consensus, is seen as a major factor behind such cases, which have been seen at some of Japan’s oldest and most prestigious companies. In one of the biggest scandals, Olympus Corp. was found in 2011 to have used false reporting to hide $1.7 billion in losses over 13 years, starting in the 1990s.
Toshiba has pledged to create a functional whistleblower system to help stave off future abuses.