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Toshiba CEO, Board Members Resign Amid Accounting Scandal

ROBERT SIEGEL, HOST:

The company Toshiba is cleaning house after revelations of accounting misdeeds that spanned six years. It's CEO resigned, as did half of its board of directors. The company apologized, and NPR's Yuki Noguchi reports it is now promising to focus on regaining trust.

YUKI NOGUCHI, BYLINE: Toshiba is perhaps the biggest name in electronics in a country obsessed with technology. It started nearly a century-and-a-half ago, making telegraphs and lamps and now makes everything from kitchen appliances to PCs TVs, telecommunications equipment and fuel cells. So after a two-and-a-half month investigation revealed this week that the sprawling blue-chip empire colluded to overstate $1.2 billion in profits since 2008, it touched off a firestorm.

ROBERT EBERHART: It's going to be a big deal. It's going to be a conversation.

NOGUCHI: Robert Eberhart is a professor of management at Santa Clara University and an author on Japanese corporate governance. He says the scandal highlights differences in how companies are run. In the U.S., boards of directors seek out independent outsiders - not so at old-school Japanese companies.

EBERHART: The people who come to the board, generally speaking - not always, but generally - have been employees of the company for a long time, so they're intimately familiar with the company - its managers, it's operations, its ways of doing things.

NOGUCHI: Eberhart says that intimacy comes with benefits, but it also means executives may be more likely to collude. However, Japanese executives, more than Americans, tend to accept blame.

EBERHART: What I think is most interesting is that in Japan, in the Toshiba case, you see that the directors and the managers responsible take responsibility and resign. I think that's a very good sign.

NOGUCHI: The scandal comes as the Japanese government pushes companies to adopt more independent voices on corporate boards. But Sanford Jacoby, a professor at UCLA, doesn't necessarily think Japanese companies should adopt all American practices. He notes accounting scandals at Enron, WorldCom and other U.S. companies have cost investors far more. Executive compensation goes up with stock prices, so in the U.S., fraud tends to be motivated by greed.

SANFORD JACOBY: When it happens at Japanese companies, more often, it's the case that executives are trying to protect the company in some way.

NOGUCHI: Would you say that that was the case here?

JACOBY: I would say that was the case here with Toshiba.

NOGUCHI: In a statement, Toshiba says it will reorganize its corporate governance. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.