This piece has been updated with the resignation of Nagayama Osamu, Toshiba’s chairmanwill be theatrical, and we are concerned that it will be sensational,” a senior official at Japan’s Ministry of Economy, Trade and Industry warned an activist fund last year. The investors were pushing to put more outside directors on the board of Toshiba, a titan of Japanese industry. In the event, it was Toshiba’s management that caused a sensation.
Once a world-famous brand that manufactured Japan’s first incandescent light bulbs and invented flash-memory data storage, Toshiba is now notorious mostly for scandals. Following a big accounting fraud and a ruinous investment in an American nuclear-energy company, it almost went bankrupt in 2017. It had to sell the prized memory-chip business and issue new shares, putting the majority of the firm in the hands of foreign investors.
The affair holds broader lessons about Japanese corporate governance, and the protracted efforts to improve it. On the one hand, the report’s contents offer plenty of grist for pessimists who believe that, for all the rhetoric about concern for shareholders, Japan Inc remains largely unreformed. Drawing on interviews and email and phone records, the report claims that Toshiba executives and some government officials worked “in unison” to prevent shareholders from fairly exercising their rights.
Not just for scandals. They also make crappy products.
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