TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Outside execs to lead Toshiba revival
Toshiba Corp
Change Size
T
oshiba Corp. stressed this week that the majority of its board members will be outside directors, in a bid to turn around the scandal-beset firm.
The electronics giant's management overhaul aims to strengthen the management supervisory function of Toshiba's board, to prevent accounting irregularities in the future. However, its efforts remain under scrutiny in the wake of an accounting scandal that damaged its corporate image.
Chairman and President Masashi Muromachi announced a new management line-up at a press conference on Tuesday. 'First and foremost, I have to concentrate on implementing measures to prevent any more occurrences, mainly by tightening internal control,' said Muromachi, who will focus on his role as president.
The new management lineup is set to officially launch after an extraordinary shareholders meeting in late September. The post of chairman will remain vacant. A key aspect of the company's restructured management is external directors leading corporate governance. The board of directors will consist of four in-house and seven outside directors, in contrast to the current lineup of 12 in-house and four external directors.
The job responsibilities of the external directors will be decided by the end of the month. Hiroyuki Itami, a Tokyo University of Science professor who is also one of the four current external directors, will likely serve a leading role as chairman of the board.
Outside directors will also fill all the seats in Toshiba's nomination, audit and compensation committees to ensure strict supervision and the prevention of more accounting irregularities.
Toshiba's decision to bring in external directors for all its key committees is unusual for a corporate scandal in the nation.
Mizuho Financial Group, Inc. was found in 2013 to have been providing loans to gang organisation members, and Olympus Corp. executives were arrested in 2012 over falsified financial reports. Both have hired more external directors since their scandals broke, but both firms have in-house executives among their auditors, as well as their audit committees.
Toshiba's nomination, audit and compensation committees essentially did nothing but approve executive appointment plans and corporate strategies drafted by the chairman, president and other directors, according to a third-party panel examining its accounting scandal. The scandal-plagued firm believes the trouble partly stemmed from these committees failing to carry out their supervisory roles over management.
Some of the newly appointed outside directors have extensive expertise in corporate management. Yoshimitsu Kobayashi, chairman of Mitsubishi Chemical Holdings Corp., also serves as chairman of the Japan Association of Corporate Executives (Keizai Doyukai) and is a member of the Industrial Competitiveness Council, a government advisory panel.
Other executives include Koichi Ikeda, an adviser at Asahi Group Holdings, Ltd., who expanded the group's focus beyond beer into various alcoholic drinks during his presidency. Shiseido Co. adviser Shinzo Maeda improved business performance after a second appointment as president.
Toshiba's choices for the shakeup reflect its efforts to include experts on supervising financial affairs, such as certified public accountants.
Muromachi will continue as president since eight of Toshiba's board members - half the total - have resigned as part of the fallout from the accounting scandal, leaving no other members familiar with all of the company's business operations.
In Toshiba's previous management crises, Taizo Ishizaka, former president of Dai-ichi Life Insurance Co., and Toshio Doko, former president of IHI Corp., were invited to serve as president. Both successfully improved Toshiba's business performance.
This time around, Muromachi was chosen by process of elimination instead of hiring an outsider. This was prompted by internal and external calls that the president must be familiar with Toshiba's businesses, as well as the fact that the firm had greatly expanded and promoted internationalisation.
However, Muromachi has said he won't retain his post for very long, prompting some to deduce that he intends to narrow down a list of candidates to succeed him in about a year.
An analyst in a related market said the management shakeup was 'reasonable from the standpoint of business continuity.'
'Bringing in more external board members is also an in-depth measure,' the analyst said.
Unlike in-house directors, however, external board directors are at a disadvantage in collecting information. It is also uncertain how effective taking on more external directors will be in directly spurring stringent internal controls.
Lawyer Makoto Saito, an expert on corporate scandals, said companies 'need to ensure internal audit functions are working properly to prevent scandals.' (++++)
