Toshiba Accounting Scandal

Lexy, Jessie, Greg, and Sudket

Overview- Situation and Ethical Frameworks - Lexy

- Ethical responsibilities and standards - Greg

- Primary causes and how they could have acted differently - Jessie

- Outcomes and key lessons - Sudket

- Conclusion

- Questions

Situation and Ethical Frameworks

Situation- Leading electronics & industries

company

- 1.9 million “accounting adjustment” discovered in September 2015

- Organisation structure and pressure led to misreporting of numbers

Situation

Situation

Ethical Frameworks- Deontology: Not morally right to use inaccurate accounting

practices to meet numbers on their reports

- Justice: ‘Fake it or will replace you with someone who will’ workplace culture and shareholders very mislead

- Egoism: CEO’s placing their own welfare above all others

Ethical Responsibilities and Standards

Where do the Ethical Responsibilities Lie? - EVERYONE working for Toshiba has the responsibility to act ethically.

- For the Toshiba scandal, the individuals that should be held accountable for the ethical responsibilities lie on every level throughout the company.

Where do the Ethical Responsibilities Lie?- Initially stemmed from the previous three CEO’s

- Not leading by example.

- Immense pressure from Toshiba’s corporate leadership onto the business unit presidents to meet profit targets is what ultimately led to the fraudulent accounting practices.

- Right down to the accountants entering the false information

Ethical Standards being Compromised- Poor Corporate Governance

• Not identifying and stopping the inappropriate behaviours.• Superiors Demanding obedience from subordinates to achieve their

profit targets.• Failure was not an option.

- Ineffective Internal Controls• Methods to ensure integrity in accounting information.

Underlying Moral Values- The individuals involved compromised their:

• Integrity- Falsifying the accounting information• Empathy- How the pressure affected coworkers and

subordinates• Respect- Superiors not respecting their subordinates limits

- Maximising profits should not comprise the individual’s moral values.

Primary causes and how they could have acted differently

Primary Causes- Immense pressure on business unit presidents

- Superiors had ‘demand obedience’ integrated into corporate culture

- Poorly functioning internal systems due to weak corporate governance

How they could have acted differently?

- Acquired independent directors

- Developed an Internal ethics committee

- Utilised third party auditors

Outcomes and key lessons

Stakeholder Outcomes - Business Outcomes

- Employee Outcomes

- Shareholder

- Supplier

- Community

Key Lessons - The right approach

- Corporate Governance

- Unethical behaviour outcome

Conclusion

- Awareness of ethical practices as they influence culture and

reputation

- Organisational structure & pressure from top executives

overwhelming

- Report accurate figures to prevent a similar situation

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ReferencesNagata, K. (2015). Pressure to show a profit led to Toshiba’s accounting scandal. Retrieved July 19, 2016, from

http://www.japantimes.co.jp/news/2015/09/18/business/corporate-business/pressure-to-show-a-profit-led-to-toshibas-accounting-scandal/#.V43bmFdYn-Z

Russel, G. (2015). Will Toshiba’s scandal bring about the change needed in corporate governance?. Retrieved July 20, 2016, from

http://www.gaaaccounting.com/toshiba-scandal-corporate-governance/

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https://blogs.cfainstitute.org/marketintegrity/2015/10/30/toshiba-accounting-scandal-a-corporate-culture-problem

The Financial Times. (2016). Toshiba shares fall 12% after warning of record $4.5bn loss. Retrieved from

https://next.ft.com/content/f985af4a-a78e-11e5-955c-1e1d6de94879

Toshiba Corporation. (2016a). Stakeholders. Retrieved July 19, 2016, from http://www.toshiba.co.jp/csr/en/engagement/stakeholders.htm

Toshiba Corporation. (2016b). Toshiba Group Standards of Conduct. Retrieved July 18, 2016, from https://www.toshiba.co.jp/csr/en/policy/soc.htm