What does promoting an ineffective culture – resulting in a billion dollar scandal – get you? Fired.

One of the world’s most recognizable consumer electronics brands has recently announced that at least of the 16 board members, including CEO and President Hisao Tanaka, are resigning over a billion dollar accounting scandal.

Toshiba, a Japanese corporation, has been caught by an independent committee overstating profits for the last seven years by a total of $1.2 billion (151.8 billion yen). The investigation started back in April with the energy division and really heated up in May when the independent committee stepped in to review (Yan, 2015).

CEO and President Hisao Tanaka taking his final bow at his resignation speech.

Tanka indicated he was never aware of any such accounting discrepancies. “I deeply apologize to all stakeholders for causing these problems,” said Tanaka said at a news conference. “This has resulted in the largest damage ever to our corporate image.”

Toshiba took the respectable crisis communication route by having the CEO not only step down, but take responsibility for “causing these problems” even if he will not acknowledge prior knowledge of the issues.

Talk about crisis! If you were hired as crisis communication consultant for Toshiba, what would your communication objective be and who would be your highest priority stakeholder?

Recently, in an effort to revive the Japanese economy , the prime minister of Japan has been cracking down on corporate culture to attract more international investors (Du, 2015). Because corporate governance is the trending area of concentration, leadership affiliated with the incident is likely to experience harsher reprimands.

While some of the executive members did not commit fraud directly, they were complicit by putting intense stress on employees to “achieve unrealistic profit targets” (Mochizuki, 2015). “Management sometimes issued such challenges shortly before the end of a fiscal quarter or year, encouraging division heads to cook the books, the panel said” (Mochizuki, 2015). The report also indicated that employees were unable to protest the unrealistic expectations due to the corporate culture preventing them from feeling as though they could protest a superior.

Since the announcement, Toshiba has postponed its earnings announcements causing analysts to recommend against investment in the company (Yan, 2015). Toshiba’s shares have already decreased in value by 20% since the initial notice in April (Yan, 2015).

Corporate culture should never promote cooking the books to achieve unrealistic profit margins. Leadership needs to be approachable and open to dialogue about pressure the employees are under. If you have a leadership team that always assumes they know best, especially over the people who are actually in the field on a daily basis, the organization will be crippled by the ego of its leadership.

If you were hired as a consultant to implement change in Toshiba’s corporate culture, where would you start and what tactics would you implement?

References:

Du, L. (21 July 2015). 5 things to know about Toshiba’s accounting scandal. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/toshiba-ceo-felled-by-accounting-scandal-1437468537.

Mochizuki, T. (21 July 2015). Toshiba CEO resigns after accounting scandal. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/toshiba-ceo-felled-by-accounting-scandal-1437468537.

Yan, S. (21 July 2015). Toshiba CEO resigns over $1.2 billion accounting scandal. CNN Money. Retrieved from http://money.cnn.com/2015/07/21/investing/toshiba-ceo-resigns/.