Ben DiPietro, The Wall Street Journal’s Risk & Compliance Journal, July 27, 2015
The crisis this week involves the actions taken by Toshiba Corp. in the wake of an accounting scandal that saw the company overstate earnings by more than $1.2 billion over seven years. The fallout from the scandal escalated last week, when the company announced the resignation of Chief Executive and board Vice Chairman Hisao Tanaka and a reorganization of its board in which half the members are stepping down. A report from the company into the overstatement said its three most recent CEOs all played roles in inflating the company’s operating profit.
Looking only at the statements of company officials, and the actions taken in removing the CEO and reshuffling the board, we asked the crisis management experts how well has the company handled this crisis? Where has it done particularly well? Where has it fallen short? What should it do next?
Davia Temin responds: “It is extraordinarily difficult for a company to buck its own tradition and culture. Japanese companies have always been opaque and less than communicative, and are not known for admitting to misdeeds until they are absolutely forced to–and sometimes not even then. Much pain could have been avoided had they owned up to their problems quickly, rather than doubled down through denial.” […read more]