Toshiba: The Ethics Behind The Profits

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In another example, the company’s computer division would sell more parts than necessary to the partners, which increased that company’s inventory, allowing Toshiba to inflate its profit figures. (Nagata, 2015)

Other malpractices include pushing back profits, postponing issuing invoices and not recording big losses. Lack of internal controls in accounting practices was found in almost all of its divisions.

After the scandal unfolded in the news, the CEO took responsibility for the damages done along with other top executives. Consequences led to market share dropping to 26 percent. The company had to record a $1 billion loss in impairment changes with respect to its semiconductor business and another $1 billion dollars in asset devaluation. As a consequence, eight of the sixteen members of the board resigned after the fraud exploded and Toshiba faced $3 Billion charges (Miller, 2015).

ETHICAL OVERVIEW

The cause of this multi-million dollar fraud was determined to be the pressure put on employees by senior management to meet unrealistic targets and their sheer ignorance to accept losses. Stress also has to be given to its corporate culture which depended on employees to be obedient and loyal towards their bosses in any situation. It can be seen that the company policy was so strict that the employees chose to alter the books of accounts to meet the expectations of their seniors and not follow ethical accounting standards.

This shows how a clear objectivity is needed while working as a professional and not alter the data to meet personal goals. This problem of unethical decisions ran throughout the organisation and was deep-rooted in the firms working force.

Not only are the employees at fault for sidelining professional competence and accountability but also the senior management for losing the integrity of the business and acting unethically. Another part of good governance involves objectivity which was lost due to materialistic goals. The employees and the accountants faced threats of self-interest, advocacy and intimidation.

SUGGESTIONS

- The entire corporate governance framework of the company should be revised and senior management should set realistic goals and targets for the subordinates. Attention should be given to the amount of pressure that’s been put up on them does not affect their professional judgement.

- Independent authorities should be created to keep regular checks and maintain a third-party view towards the company’s policies and procedures.

- Whistleblower’s policy should be adopted. It refers to an employee tell someone/organisation about any illegal or immoral activity that is happening in the company with the hope of it changing.

- Independent directors are to be called upon in the board as their judgement would be unbiased as well as concentration of power would decrease.

- Internal controls should be strengthened and multiple audits are to be done to not miss any discrepancies.

CONCLUSION

Toshiba scandal ended up being a decade long fraud which shook the Japanese economy and stained the corporation’s image for the coming century. It shows how a clear governance strategy based on modern ethical principles is a must in today’s world. It also highlights the importance of senior management and a professionals to work according to what is true and fair.

It is paramount that businesses adhere to ethical standards of not only accounting but all departments as it the fundamental component that connects the society and the business. Professionals should understand their standing in this scenario and realise that they are the mirror of true and fair view for the stakeholders.

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REFERENCES

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Nagata, K. (2015, september 18). Retrieved from Japan Times: https://www.japantimes.co.jp/news/2015/09/18/business/corporate-business/pressure-to-show-a-profit-led-to-toshibas-accounting-scandal/#.WbSwPMgjFPY

Summerfield, R. (2015, october). Retrieved from Financier worldwide: https://www.financierworldwide.com/toshiba-behind-the-numbers/#.WbSu6MgjFPY

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