Professional Documents
Culture Documents
SCANDAL
(2015)
Submitted by:
BSA 2-1
Bodestyne, Jan Vic U.
Geron, Queenie A.
Navarrete, Alex Kate
Rodriguez, Jane Ann A.
INTRODUCTION
To further introduce and learn what went wrong during the 2015 financial scandal,
an understanding of the rules and conducts in the company is needed. We looked for the
company’s own code of conduct and found the Standards of Conduct for Toshiba Group to
guide all of their people in doing their respective jobs.
Toshiba Group has set up management principles: we commit to raising the quality
of life for people around the world, ensuring progress that is in harmony with our planet.
These Standards of Conduct for Toshiba Group (hereinafter called the "SOC") have
thus been established in order to make our management principles a reality and as a basis
to guide our activities so that we can operate under the principles of fairness, integrity and
transparency and contribute to the formation of a sustainable society.
Each of the directors, corporate auditors, and officers (hereinafter called the
"Directors") and employees (hereinafter called the "Employees") of Toshiba Group should
comply with the SOC and strive to operate a sound and high quality business as a part of a
global enterprise which emphasizes a balance between the environment, human rights and
local communities under the principle of giving the highest priority to life, safety and
compliance with laws, regulations, social standards and ethics.
I. Human Rights
1. Toshiba Group Directors and Employees
Directors and Employees shall:
A. accept and accommodate different values, and respect the character
and personality of each individual, observe the right to privacy and human
rights of each individual; and
B. avoid any violation of human rights based on race, religion, sex,
national origin, physical disability, age or sexual orientation, and
C. avoid physical abuse, sexual harassment, power harassment (i.e.,
bullying or harassment by superiors in the office) or violation of the human
rights of others;
IV. Bribery
2. SOC for Toshiba Group Directors and Employees
Directors and Employees shall:
1. neither make nor offer, either directly or indirectly, any payment or
anything of value, whether in the form of compensation, business
entertainment, gift, contribution, gratuity, or other form, that is illegal or
prohibited by any applicable law or regulation, in any dealings with any
government agencies, their officials, or members of any political party
(including holders of a political office or candidates for such office) (except for
cases that do not violate applicable laws or regulations and are considered
socially acceptable), and shall not engage in sales transactions, loan
transactions and the like (including guarantee transactions) that are not at
arm's length;
V. Environment
2. SOC for Toshiba Group Directors and Employees
Directors and Employees shall:
1. endeavor to do research and development activities and product
manufacturing that reduce the impact on the environment, and also work
proactively to maximize the efficient use of energy, reduce the use of natural
resources and recycle in the course of all business activities in order to
prevent global warming and efficiently use resources;
2. continually improve environmental activities by implementing action
plans from both short-term and long-term perspectives through daily
operations;
3. conduct periodic measurements and inspections and maintain records
accordingly. When there is an irregularity, promptly take corrective and
preventive measures
VI. Export Control
BODY
The accounting scandal of Toshiba violated numerous ethical issues or even its own
Standard of Conduct (SOC)
1. The company violated its standard of conduct against power harassment by pushing
the lower-level managers do what they want like overstating the profits and not
giving them the right to voice out their opinion on certain policies of the company.
2. According to the company’s SOC directors must inspect the records regularly and
ensure its integrity and if there’s any irregularities, it must be reported right away.
But this did not happen, though top executives did not directly instruct the different
units, the pressure it puts leave them no choice but to commit fraud.
3. For accounting SOC, the company failed to release accurate accounts and numbers
that will help its different uses in making decisions.
4. Toshiba, as stated in their SOC, envisioned to have a cooperative workplace
environment but what happened to the 2015 financial scandal says otherwise.
5. One of the general principles of professional conduct is the social and civic
responsibility. The company failed to think of the interest of the public and the users
of its financial statements like it did not give the investors the right information for
them to decide rationally.
6. The company violated government’s policy about a fair, accurate and transparent
financial reporting
7. The company, especially its top executives did not respect its employees voices and
opinions about important matters.
SWOT ANALYSIS
Strength
Committed and competent human capital can be a powerful source for a business
competitiveness advantage.
High and improved product quality may increase brand loyalty and help boost
Toshiba’s performance in the market.
Diversity in the workplace can act as a major strength especially that the company is
included in the international market.
Weaknesses
Poor project management practices can internally weaken the ability of the
organization to successfully open new branches, expand the product line or even
monitor the possible impact of the product to the company.
Lack of company commitment and high percentage of employee turnover can increase
recruitment costs and reduce company productivity.
High stress and pressure in jobs with low work ethics of employees makes the
workforce less productive or can make the employees feel unsatisfied with their own
performance.
The misalignment between the company’s leadership style and its core strategic
objectives can make the business organization directionless.
Opportunities
The development of new technologies for the innovation of products and the way of
its production can be used in business operations. The advancement of technological
resources can lead to less cost and more profit that will improve the company’s
performance and production.
The changes of customer preferences, tastes, and needs can be an opportunity for the
company to take advantage of and be in trend in line with the continuous change that
is observed in the market.
The continuous growth of population and increase in new and potential customer
segments is an opportunity for the company to reach a bigger market.
Threats
The changing of imposed business framework and regulations makes it more complex
and a challenge to make up for the new set of standards to be comply with. The
inability to comply with these changed regulations can raise the risk of lawsuits and
other issues.
Shortage of skilled laborers in the market can make it difficult for the company to
attract talent with the right skills set for the production and process of its products.
The increasing number of competitors may affect the company’s ability to sustain its
position in the market and to provide new offers based on different market factors.
CONCLUSION AND RECOMMENDATION
In conclusion, what Toshiba did is a violation of its Standard of Conduct and Business
Ethics generally. Toshiba tried to make its financial statements pleasing in the eyes by
overstating its profit and also understating its expenses. It was caused by the immense
pressure given into the presidents of different units like giving unrealistics targets for the
different units of Toshiba. The scandal showed the lapses and loopholes on the company’s
implementation of its Standard of Conducts and it surfaced the culture in the company that
prohibits its lower-leveled employees to oppose or even express their dissent about certain
policies of the company.
Recommendations
Since the root of the scandal was traced to the “Challenge system”, or meeting the
profit targets that were considered as an absolute goal of the company, and that the
supervisors were putting pressure on their employees to achieve the same, we recommend
to put a stop and eliminate this kind of system. Changing their corporate culture,
reformation, and reestablishment of the company’s corporate governance must be
executed because the unprofessional practices are within internal control. We also
recommend that they hire outside directors as part of the auditing committee to overlook
their business transactions and financial statements to promote transparency and correct
any misrepresentations involved.
The employees were too afraid to go against the management’s manipulation and
unacceptable business practices. Hence, we recommend the promotion of a strong
whistleblower system for employees to voice out about malpractices without fear.
Every company must be headed by a competent and qualified board of directors for
it to achieve its goals and a continuing operation. We recommend that they oversee the
qualifications of their prospective board of directors, and that they nominate those who are
fit for the job. Independent directors must also be present to monitor management from an
independent perspective to function as they should.
In terms of compliance, we recommend as well to increase awareness on accounting
compliance. In Toshiba’s fraud case, follow-up investigation indicated 98 executives involved
in the fraud. What’s worse, it also found that senior executives turned a blind eye to and
even encouraged improper accounting. To be able to increase awareness on compliance,
Toshiba should engage in honest conduct and comply with all applicable laws, rules and
regulations, and adhere to the standards and restrictions imposed by those laws, rules, and
regulations.
Fraud cases are inevitable and almost all types of organizations face the threat of
fraud risk. To be able to prevent such, we recommend that they should regularly check and
update risk fraud assessment and to set restrictions for management.