Arab Today, arab today toshiba scandal exposes japan incs governance flaws
Last Updated : GMT 08:53:10
Arab Today, arab today
Arab Today, arab today

Toshiba scandal exposes Japan Inc's governance flaws

Arab Today, arab today

Arab Today, arab today Toshiba scandal exposes Japan Inc's governance flaws

Hisao Tanaka (L)
Tokyo - AFP

Toshiba's billion-dollar accounting scandal has shone a light on a corporate culture in Japan still beset by collusion in its senior ranks, unquestioning employees and poor external controls, experts say.

The vast 140-year-old conglomerate was hammered this week by embarrassing revelations that top executives pressured underlings to inflate profits by about $1.2 billion since the 2008 global financial crisis.

An independent report, which found senior managers complicit in the affair, pointed to the rigid system that powered Japan's post-war boom -- lifetime employment in exchange for complete loyalty to the company.

"If you look at management, you generally find people over 50 who have spent their career at the company, climbing up through the ranks," said Keio University guest lecturer Takeshi Natsuno, a former executive at mobile giant NTT Docomo.

"For 30 years they all ate from the same bowl. Everyone knows it isn't good but so far nothing has changed."

It wasn't supposed to be that way at Toshiba, which was hailed as one of the early leaders in changing Japan's clubby boardroom culture.

The vast firm, which had sales of $54 billion last fiscal year, hired outside directors and adopted a 16-member board a decade ago, among other changes, to "enhance management efficiency and improve transparency".
But the scathing report -- commissioned by the company after financial regulators questioned Toshiba's books earlier this year -- found a litany of problems, including a pair of former diplomats on its audit committee who were not up to the task.

Japanese firms are peppered with former bureaucrats given plum jobs in the industries that they once oversaw, despite many having few relevant skills or the incentive to question management.

"Only one of the three external directors on the audit committee is well-versed in financial matters, in a company that we now see had succumbed to the Japanese tendency to not question orders from above," said Nicholas Benes, head of the non-profit Board Director Training Institute of Japan.

- 'Shameful results' -

Benes was a key player behind Japan's long-awaited corporate governance code, which came into effect less than two months ago.

It was hailed as a way to boost trust with foreign investors and avoid scandals such as the $1.7 billion accounting fraud at camera giant Olympus several years ago, one of Japan's worst ever.

Toshiba, whose shares dived after the problems came to light, remains on a 400-member index that highlights firms with the best return on equity and other shareholder-friendly criteria.
"It is outrageous that a major company that represents Japan repeatedly padded its profits on a corporate-wide basis," the top-selling Yomiuri newspaper said in an editorial.

About half of Toshiba's board resigned Tuesday with president Hisao Tanaka and vice chairman Norio Sasaki -- also a former president -- the most senior to quit their posts.

Headed by a former Tokyo prosecutor, the investigating panel described a corporate culture where underlings could not challenge powerful bosses intent on boosting profits at almost any cost.

While the scandals at Enron and WorldCom in the United States are reminders that accounting fraud is not just a Japanese problem, the country's corporate traditions enabled the years-long scheme at Toshiba, observers said.

And "the problem is not unique to Toshiba -- in many Japanese firms the attitude is not to oppose the bosses", wrote Hitoshi Kujiraoka, a journalist at the Asahi newspaper.

Best known for televisions and electronics, including the world's first laptop personal computer and DVD player, the massive company has more than 200,000 employees globally and also operates in power transmission and medical equipment.

Its business was dented by the financial crisis, while the 2011 Fukushima disaster squashed demand for atomic power at home in a big blow to Toshiba's key nuclear division.

Top executives complained of "shameful results" that could not be made public, while the report said former president Atsutoshi Nishida had demanded an unrealistic profit in the personal computer division.

"It's tough, but we must do it," he said in 2008, according to the report.

- Closer scrutiny -

Kaoru Kamisaka, head of financial information consultancy Japan Economic Pulse, said the new governance code will put firms under the microscope.

"Institutional investors are keeping a closer eye on companies so there won't be a repeat," Kamisaka said.

Benes from the director training institute said the Toshiba scandal was likely to be a "bump in the road" toward better governance.

"I do not think such hidden icebergs are rife among Japanese companies, but this will serve a stern warning bell to other companies that 'it can happen to anyone', and that director skill sets matter," he added.

"Just because you were the ambassador to Brazil, does not mean you are fit for the audit committee."

 

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today toshiba scandal exposes japan incs governance flaws Arab Today, arab today toshiba scandal exposes japan incs governance flaws

 



Arab Today, arab today

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today toshiba scandal exposes japan incs governance flaws Arab Today, arab today toshiba scandal exposes japan incs governance flaws

 



Arab Today, arab today France defies terrorism through tourism

GMT 15:18 2017 Saturday ,20 May

France defies terrorism through tourism
Arab Today, arab today Zainab Fadel Oglu designs “Shakerin” mosque

GMT 12:13 2017 Thursday ,11 May

Zainab Fadel Oglu designs “Shakerin” mosque
View News in Arabic - Business: أخبار الشركات
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Mozambique's gas boom dream under threat

GMT 16:29 2017 Monday ,08 May

Mozambique's gas boom dream under threat
Arab Today, arab today Prepares to give stargazers an eyeful

GMT 13:38 2017 Monday ,06 March

Prepares to give stargazers an eyeful
Arab Today, arab today Jaguar displays XF Sportbrake line

GMT 14:36 2017 Monday ,08 May

Jaguar displays XF Sportbrake line
Arab Today, arab today BMW sees forecasts in reach

GMT 09:04 2017 Thursday ,04 May

BMW sees forecasts in reach
Arab Today, arab today Climate science: Bad news gets worse

GMT 08:48 2017 Saturday ,06 May

Climate science: Bad news gets worse
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday