In a press briefing in Japan this afternoon, executives at the scandal plagued Company said that Hisao Tanaka, president and chief executive, will be replaced by Toshiba’s chairman, Masashi Muromachi tomorrow.
Tanaka’s predecessor, Norio Sasaki, who is vice chairman, will also quit.
Three consecutive Toshiba chief executives fueled more than $1 billion in accounting irregularities by setting unrealistic profit targets and demanding that subordinates meet them, the independent panel hired by the company said yesterday.
In a report likely to lead to wholesale changes at the top, the panel said the 140-year-old company, one of Japan’s best-known corporate brands, had lax controls and a top-down culture that left managers little choice but to fudge their numbers.
Toshiba overstated its operating profits over several years in accounting irregularities involving its top management, independent investigators said on Monday.
Tanaka and Sasaki knew about the profit overstatement amid a pressurised corporate culture that prompted business heads to manipulate figures to meet targets set by top executives, the investigators found.
The Japanese finance minister, Taro Aso, said that the accounting irregularities were “very regrettable.” Coming at a time when Japan is trying to regain global investors’ confidence with better corporate governance, they risked damaging confidence, he warned.
“If [Japan] fails to implement appropriate corporate governance, it could lose the market’s trust,” Aso said. “It’s very regrettable.”
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.
In a statement issued in Japan the company said that it was considering appointing outside directors to over half of its board seats.
The third-party report showed that several executives in the PC Company played a part in the overstatement of profits going back to the 2008 financial year.
The report released on Monday said Toshiba had overstated its operating profit by $1.7 Billion over several years, roughly triple Toshiba’s initial estimate.
The findings are expected to lead to the restatement of earnings, a board overhaul and potentially hefty fines at the computers-to-nuclear conglomerate in Japan’s worst corporate scandal since Olympus was found to have covered up $1.7 billion in losses in late 2011.
Shares in Toshiba rose 6 percent on Tuesday on relief the report had few nasty surprises. But they are still down around 23 percent since Toshiba first disclosed cases of accounting irregularities in early April.
“Institutional investors and other long-term funds have already unloaded Toshiba shares, so currently the stock price is being driven by short-term investors,” said Takatoshi Itoshima, chief portfolio manager at Commons Asset Management.
“The bad news is out. As long as Toshiba won’t be delisted, such trade will continue.”