(Reuters) — Toshiba (TYO:6502) CEO Hisao Tanaka will step down in September, along with other board members including vice chairman Norio Sasaki, to take responsibility for accounting irregularities, sources familiar with the matter said.
The Japanese conglomerate hired a 3rd-party committee to investigate past bookkeeping practices which sources say led to profits being overstated by more than ¥170 billion ($1.2 billion). That’s more than triple Toshiba’s initial estimate of around ¥50 billion. Toshiba expects ¥300 billion to ¥400 billion ($2.4 billion to $3.2 billion) in charges related to the scandal, the sources said.
Other sources with knowledge of the probe have said investigators were looking into the role that top officials played in the irregularities, focusing on whether they had knowingly encouraged malfeasance. The committee is expected to release its findings next week.
The scandal is a reminder Japan Inc is still in the early stages of a campaign backed by Prime Minister Shinzo Abe to improve corporate governance. Toshiba’s shares have slumped around 27% in Tokyo since April when the company 1st disclosed irregularities in its books.
The independent committee is likely to say Toshiba needs a governance overhaul, and more than half of its board could be replaced at the next shareholders’ meeting in September, sources said today.
The sources declined to be identified because they were not authorized to speak with media.
A Toshiba spokeswoman said the company had not yet made any decision on the matter and was waiting for the 3rd-party committee to release its findings.
The laptops-to-nuclear conglomerate first disclosed accounting irregularities in early April, 2 months after financial regulators ordered a report on past bookkeeping. It has been unable to close its books for the past financial year in the meantime and suspended its year-end dividend payout.
Sources said previously that 1 theory investigators were looking into was that executives, worried about the impact of the 2011 Fukushima disaster on its nuclear unit, set overly aggressive targets in new businesses such as smart meters and electronic toll booths, encouraging the understating of costs and overestimating of revenue.
It was not immediately clear who could replace Tanaka and other directors. The company said last month that it was considering appointing more outside directors to the board.
Ironically, Toshiba was 1 of the early companies in opening up its board to outsiders, with a quarter of its current 16 board members independent. Critics say the independent members, including 2 former diplomats, likely lacked the skills to contribute to strategy or rigor in oversight.