Desperate moves in desperate times may cost Toshiba too much

Jul 15, 2015 15:11 GMT  ·  By

Toshiba top brass including its CEO will supposedly step down from their roles in the next months, due to accounting irregularities. It is believed that its top executives have overstated the company's profits by as much as 170 billion yen ($1.3 billion).

Although there has been no official announcement, Toshiba CEO Hisao Tanaka and his vice chairman Norio Sasaki will leave their executive roles at the company, according to sources at Reuters. Although Toshiba has been suspected in the past of presenting erroneous accounting information, these errors come to light only now.

It is believed that such forged profit margins were added to Toshiba's business were caused by the fallout from Fukushima disaster in 2011. Toshiba had untenable financial losses so it tried to overstate other businesses in Japan as smart meters and electronic toll booths, downplaying the huge crisis Toshiba was going through.

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It is believed that the executive mass resignations are far worse than it has been originally believed, as more than half of Toshiba's top brass is expected to go away in a sweeping move made by the board of directors. Company share prices have fallen 10 points in the past 24 hours as a result of the news, though Toshiba shares have lost about a quarter values since April when the accountancy errors were first discovered.

Apparently, this entire move was the direct result of a campaign backed by Prime Minister Shinzo Abe to impose tighter austerity measures encouraging corporate audits on all Japanese corporations.

It's unknown who will replace the current CEO and the other directors, but it is believed that more outside directors will join the board. Toshiba is one of the first companies to open its board to outsiders with 16 board members being independent; however, with at least two members having little to no professional background to run a company of this size, this is believed to have contributed to Toshiba's lack of strategy or rigor in oversight.