Toshiba, skills management, corporate culture, accounting scandal, financial results, finance, fraud risk, decision making
The current CEO and two of his predecessors since 2008 are accused of pushing their subordinates to juggle the numbers in a way to minimize asset write-downs and other negative accounting records, in order to show financial results close to objectives aimed at reassuring shareholders and banks.
The Toshiba's accounting scandal reveals a serious issue in the companies' culture, especially in the company's management. In fact, this scandal reveals a series of pressure moves dealt by higher management on employees in order to undervalue a series of depreciation and overall, to rig the figures of Toshiba's accountability in order to make sure the results of the company actually comply with the defined objectives.
[...] However, this solution might not be as effective as expected if this service is too strongly included under the management. Again, on that situation, the bnaking industry can provide us with a series of examples, developed especially after the Kerviel scandal and the 2008 financial crisis. One of the solutions developed has been to create a whole department for control of all risks within the company. The staff for this department, despite of being inside other departments, was not submitted to the normal hierarchy but to the head of compliance and risk control, which ensures the independency of this staff. [...]
[...] Why those issues exist and how can we solve them? The issues that have been spotted in the analyze of the Toshiba's auditing scandal carry at the same time issues from a cultural management but also a cultural relation to hierarchy and to failure. In fact, this situation results from the combination of those issues and the exploitation of those cultural characteristics by successive CEO's. The fact that this fraud is used and endures under several of them well shows how deep and how important those cultural issues are. [...]
[...] It is fair to think that internal audit might not completely escape those issues. The most efficient solution might, indeed, be the use of external and independent auditors, coming from auditing companies with a strong incentive on presenting findings and with a strong capacity to intervene on every aspect of the company. What is more, this solution appears to be the most capable of reassuring the markets, especially given the fact that this very same scandal was, in fact, discovered by an external audit. [...]
[...] What are the stakes in skill management? This situation carries at least three risks for the skill management in Toshiba. First, it is fair to consider that the high management, despite of unethical behavior in terms of information and human resources management have a deep knowledge of what is the company, its markets and projects. This scandal is likely to result in a deep change among the company's high management, which might at the same time be a strong opportunity but also a strong risk for the company, especially given the scrutiny of financial markets of the years to come regarding the results of the company. [...]
[...] In fact, the very simple axiom that targeted results must be performed, puts on a major pressure all elements of the company, and tends to silence all opposition to the management's decision. This situation and culture, if not changed, cannot result in a correct and ethic information processing and decision-making process. In fact, given that results must be met at all costs, it introduces a difference of perception that will, in almost any case, result in a failure in compliance, whether it is an accountability or in the industrial process of production. [...]
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