The Toshiba Accounting Scandal: How Corporate Governance Failed Case Study Solution


The Toshiba Accounting Scandal was a corporate governance failure that shocked the world in 2015. The scandal exposed the fraudulent practices of one of Japan’s largest corporations and damaged the reputation of the country’s business community. This case analysis will examine the case issues, the causes of the scandal, and provide recommendations for improved corporate governance.

Case Issue:

The Toshiba Accounting Scandal involved the systematic manipulation of the company’s financial records, which led to the overstatement of profits by $1.2 billion over seven years. The scandal was uncovered in 2015 when an independent investigation revealed that Toshiba had inflated its profits to meet aggressive targets set by senior executives. The investigation also found that Toshiba had engaged in improper accounting practices and had hidden losses in its nuclear business.

The scandal caused significant damage to Toshiba’s reputation and resulted in a sharp decline in the company’s stock price. It also led to the resignation of several senior executives, including the CEO and Chairman of the company.

Case Analysis:

The Toshiba Accounting Scandal was a result of a combination of factors that led to the failure of corporate governance at the company. One of the primary causes of the scandal was the company’s aggressive profit targets, which were set by senior executives. These targets created pressure on employees to meet the targets at any cost, leading to the manipulation of financial records.

Another factor that contributed to the scandal was the lack of oversight and accountability within the company’s corporate governance structure. The company’s board of directors failed to provide effective oversight of the company’s financial reporting and did not adequately respond to warning signs of fraudulent activities.

Furthermore, the company’s corporate culture also played a role in the scandal. The company’s culture emphasized obedience and loyalty to superiors, which led employees to prioritize meeting aggressive profit targets over ethical behavior.


The Toshiba Accounting Scandal was a significant corporate governance failure that had far-reaching consequences for the company and Japan’s business community. The scandal was a result of a combination of factors, including aggressive profit targets, a lack of oversight and accountability, and a corporate culture that prioritized obedience over ethical behavior.

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To prevent future scandals, Toshiba and other companies must take steps to improve their corporate governance practices. Some recommendations include:

  1. Implementing stronger oversight mechanisms: Companies must establish stronger board oversight mechanisms to prevent fraudulent activities.
  2. Creating an ethical corporate culture: Companies should prioritize creating an ethical corporate culture that values transparency and ethical behavior.
  3. Educating employees: Companies should educate employees on ethical behavior and provide them with the tools they need to identify and report unethical behavior.
  4. Addressing executive compensation: Companies should address executive compensation to prevent executives from prioritizing short-term financial gains over long-term company stability.

By implementing these recommendations, Toshiba and other companies can improve their corporate governance practices and prevent future scandals.

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