|
 Tanaka will be temporarily replaced by Chairman Masashi Muromachi
after an independent inquiry found the CEO had been aware the
company had inflated its profits by $1.2 billion over a period of
several years.
"I see this as the most damaging event for our brand in the
company's 140-year history," Tanaka told a news conference after
making a ritual deep bow of contrition to a flurry of camera
shutters and flashes.
"I don't think these problems can be overcome overnight."
Muromachi is considered a safe pair of hands to lead Toshiba through
its current turmoil before handing the reins to a successor. The
company plans to announce next month the delayed business results
for the financial year ended in March.
Tanaka's predecessors as presidents of the laptops-to-nuclear
conglomerate, Vice Chairman Norio Sasaki and adviser Atsutoshi
Nishida, will also step down after the third-party report showed
they played a part in the overstatement of profits going back to the
2008 financial year.
A total of eight officials resigned on Tuesday and Tanaka said that
the company is now considering appointing outside directors to over
half of its board seats.
Monday's report by an outside panel of accountants and lawyers said
Toshiba had overstated its operating profit by 151.8 billion yen
($1.22 billion), roughly triple Toshiba's initial estimate.
Tanaka and Sasaki pressured business divisions to meet difficult
targets and knew they were overstating profits and delaying the
reporting of losses, amid a culture of not going against the wishes
of superiors, the report said.
Koichi Ueda, an attorney and head of the panel, said he was
surprised by what they had found.
"That a company that represents Japan, to be doing something like
this institutionally, was shocking," he told reporters on Tuesday.
Tanaka did not dispute the findings, but said he had no intention of
encouraging accounting irregularities.
"It's not my understanding that I gave orders for improper
accounting, but the reality is that such an observation has been
made," Tanaka said.
The findings are expected to lead to the restatement of earnings and
potentially hefty fines in Japan's worst boardroom scandal since
Olympus Corp was found to have covered up $1.7 billion in losses.
[to top of second column] |
RISKS TO INVESTOR CONFIDENCE
Japanese Finance Minister Taro Aso said earlier on Tuesday that the
accounting irregularities at Toshiba were "very regrettable", coming
at a time when Prime Minister Shinzo Abe is trying to regain global
investors' confidence with better corporate governance guidelines.
Aso declined to comment when asked if Toshiba would face any kind of
financial penalty. Sources have said regulators were beginning their
own review of Toshiba's book-keeping, based on Monday's report.
Some analysts have voiced concerns that there could be more issues
ahead, including a possible writedown on Toshiba's Westinghouse
nuclear business which was not a major target of the latest probe.
A Toshiba executive brushed off suggestions that the $5.4 billlion
the company invested in Westinghouse in 2006 had weighed on its
finances and led to improper accounting, saying the business was
doing well.
"Compared with the time of the acquisition, operating profit has
expanded a great deal," Keizo Maeda, executive vice president, told
reporters.
Shares in Toshiba rose 6 percent on Tuesday on relief the report had
few nasty surprises. But they are still down over 20 percent since
Toshiba first disclosed cases of accounting irregularities in early
April.
Rating Agency Standard & Poor's said on Tuesday that the required
restatement of Toshiba's profit could lead to its credit rating
being downgraded.
"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.
(Additional reporting by Taiga Uranaka, Chang-Ran Kim and Ayai
Tomisawa; Editing by Richard Pullin and Rachel Armstrong)
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