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Toshiba chief Hisao Tanaka resigns over faked profits

Published 21/07/2015

The chief executive of Toshiba is stepping down
The chief executive of Toshiba is stepping down

Toshiba's chief executive has resigned, taking responsibility for doctored books that inflated profits at the Japanese technology manufacturer by 151.8 billion yen (£784.2 million) over several years.

Toshiba acknowledged a systematic cover-up, which began in 2008.

Various parts of the Japanese company's sprawling business including computer chips and personal computers were struggling financially, but top managers set unrealistic earnings targets under the banner of "challenge", and subordinates faked results.

On top of its struggles in electronics, Tokyo-based Toshiba's prospects in nuclear power, one of its core businesses, were shaken after the 2011 Fukushima disaster set off public fears about reactor safety, making new nuclear plants unlikely in Japan.

All 48 of the nation's working reactors are now offline.

Bowing deeply before flashing cameras at a news conference, chief executive Hisao Tanaka kept his head lowered for nearly half a minute in a gesture meant to convey deep shame and contrition.

Mr Tanaka's predecessors, Norio Sasaki, now a vice chairman, and Atsutoshi Nishida, an adviser, also gave up their posts.

"We have a serious responsibility," Mr Tanaka told reporters. The company will need to "build a new structure" to reform itself, he said.

The scandal highlights how Japan is still struggling to improve corporate governance despite recent steps to increase independent oversight of companies.

In 2011, Olympus, which makes medical equipment and cameras, was embroiled in a scandal after its president Michael Woodford, a Briton, blew the whistle on the company's cover-up of losses.

Toshiba has repeatedly apologised to shareholders and customers. It has set up an outside investigation group to analyse why the scandal happened and propose what needs to be done to prevent a recurrence.

The inflation of profits to meet targets was carried out not only on one or two projects, but across the board, sometimes because the projects were not even breaking even, according to the report of an investigation.

"There was intense pressure to produce results under 'The Challenge' initiative," the report said. "So employees felt cornered into resorting to inappropriate measures."

Mr Tanaka will be replaced by Masashi Muromachi, chairman of the board.

Six other executives also gave up their posts at Toshiba.

Following news of the resignations, Toshiba shares rose 6%, recovering from recent losses, as investors took the news as a sign that the company might right itself.

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