Current Chairman Masashi Muromachi will be Tanaka’s successor and a further eight board members including the vice-chairman Norio Sasaki have stepped down from their positions in order to allow the company to reform their management structure. On Monday, a report said that Toshiba would need to adjust its financial statements in which the corporation operating profit between 2009 and 2014 was overstated by over $1.2 billion.
“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”, the maker of power plants, computer chips and domestic appliances said.
This is Japan’s biggest business scandal since camera and medical equipment maker Olympus Corp’s 13-year cover-up of $1.7 billion (784 million pounds) in losses blew up in late 2011.
Hardware firm Toshiba is counting the cost of overstating its financial results, and has announced that its CEO will step down over the scandal.
This investigation started just as Shinzo Abe the Prime Minister of Japan introduced measures to improve the corporate governance of Japan. Sources have said regulators were beginning their own review of Toshiba’s book-keeping, based on Monday’s report.
An independent investigation found that Hisao Tanaka, president and chief executive had been aware the company had been inflating its profits over a number of years. “It’s very regrettable”.
Despite the storm engulfing the company, Toshiba shares jumped on Tuesday as the report ended months of uncertainty about the extent of the accounting problems, and who was to blame.
The cover-up was reportedly prompted by Toshiba’s top managers putting extreme pressure on subordinates to meet unrealistic business targets they set as part of Toshiba’s “Challenge” initiative.
Following the resignations, Toshiba shares rose 6 per cent as investors took the news as a sign that the company might right itself.
Following verification by both the company and auditors Ernst & Young ShinNihon, Toshiba added, “it is possible that amounts such as those for depreciation and tax expenses may be changed for some fiscal years”.