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Business

2 bosses' rivalry helped fuel Toshiba's bad accounting

TOKYO -- Frictions between a former president and his predecessor played a part in encouraging accounting irregularities at Toshiba.

     When Vice Chairman Norio Sasaki was president from 2009 to 2013, then-Chairman Atsutoshi Nishida was adamant about meeting budget targets. To thwart Nishida's influence, Sasaki apparently ended up instructing subordinates to cook the books.

     This came after Toshiba had switched to a new governance system, allowed under a 2003 legal change, that vested oversight authority in the chairman and executive authority in the president to achieve separation of powers. The stock market welcomed the shift as a sign of an eagerness to strengthen corporate governance. But in the end, the step seems to have been largely cosmetic.

     When current President Hisao Tanaka took the helm in 2013 with Nishida's backing, he ended up following in his predecessor's footsteps instead of addressing the inappropriate practices. This, too, was motivated by a spirit of rivalry: Tanaka did not want earnings to fall below those of the Sasaki era. Nishida is now an adviser.

     Toshiba seeks to rejuvenate its leadership team with younger blood to uproot its top-down culture, a fundamental cause of the inappropriate accounting. Tanaka and Sasaki are expected to announce their resignations in a news conference Tuesday. More than half of the board's 16 members will likely step down at a special shareholders' meeting in September.

     Corporate governance will also get an overhaul. The company will set up as early as this month an expert committee of accountants and lawyers to offer advice on the board's roles, the selection of directors, and decision-making mechanisms.

(Nikkei)

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