Toshiba CEO and execs quit over $1.2bn six-year accounting scandal Toshiba CEO Hisao Tanaka and seven other bigwigs have quit after a probe concluded profit figures had been inflated beyond their real values. The Japanese electronics giant said in a brief statement [PDF] today that $1.2bn (£770m, 151.8bn yen) was incorrectly added to Toshiba's income-before-tax figures in the 2008 to 2014 …
Writing as a long-time shareholder in Toshiba, I am certainly not impressed. However, I don't really blame Toshiba or the accountants as much as the irrational or even insane uber-profit pressures that drove them to do it.
It seems to me that the fundamental problem is that Toshiba is basically a commodity company, and commodities don't get any stock-market respect these days. Small profits are NOT acceptable, especially combined with the risk of a major loss in a bad year. There is a kind of fundamental mismatch between being a "glamorous" high-tech company and earning small profits because you are mostly producing commodity goods. Always lots of competitors trying to produce and sell any commodity, but if your profits are too small because of that reality, the falling stock price and lower market cap make the company too vulnerable to financial shenanigans.
Time for a tortured metaphor? What really worries me is that Toshiba is NOT the brightest star in this barrel of starfish. Not a trailblazing company these days (if indeed they ever were), and so it is quite likely that some other Japanese high-tech companies have been playing similar games. Things seem too quiet out there?
Fishing (mentally) for an example candidate... On the surface, I can't see the similarities between Toshiba's problems and Sony's, but Sony has been more of a trailblazer, so the framing would naturally be different. Maybe the underlying problems can be seen as similar from some perspective?
I agree with your take on the pressure exerted on companies by the financials and stock exchange. I recently had a student from a big international IT firm and he told me that it's completely insane. The company in question makes nice profits, but if the profits are not according to expectations, then all hell breaks lose.
To get the stock from dropping, measures are being taken, like randomly cutting personnel (which has proven to be a bad idea, they go about that differently now) and cost cutting taken to extremes (like revoking expenses for a conference which was already paid for). If you really think deeper on this, it almost becomes terrifying. Instead of just boringly delivering a good product and decent profits, companies are partially driven by the whims of the stock exchange and financial markets.
I think the move to go private by Dell has been a very good idea; why let yourself be vulnerable to all the stupidity, driving the current markets, and prevent yourself from just executing a longer term strategy?
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