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Analysis Of Toshiba Ethical Breakdown

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In 2015, the then CEO of Toshiba resigned by declaring the occurrence of 1.2 billion dollar scam by false accounting , which left the world in a shock effecting its 4lakh shareholders and stake holders collectively. Leading to decline of stocks nearly 40% drop in shares. No one have understood till date that why a company having 100 years’ experience and having its market spread across infrastructure, electronic devices and systems, health care, lifestyle products and services would betray its shareholders and stakeholders.

Ethical factors for the occurrence of fraud:

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  1. The company had a personnel rotation policy for a period of 5 years, by which the project lead or management who initiated the project is gone after five years and the losses which incurred in that period was put on responsibility of the new project management. Such policies make employees to work based on the short term goals, but no focus on long term goals of company.
  2. Pressure from presidents on employees to meet targets which appeared as ill-conceived goals, this lead to fraudulent accounting practices, starting from accountants entering false information and carried to higher levels in the company.
  3. The ethical standards have been compromised in the company such as poor corporate governance i.e. no identification of inappropriate behavior of employees and no appreciation to employees if they achieve target and permanently firing them if they don’t do so, which is a major breakdown of ethical practices generating pressure on employees.
  4. Ineffective accounts verification, underlying moral values where the individuals involved compromised their integrity by disclosing actual data and entering false reports, empathy by not recognizing how the rules effect workers and subordinates and respect where the superiors don’t care about subordinates and co-workers.

Suggestions:

  1. Changing the work culture where every employee must be accountable and responsible to his work and must focus not only on his/her professional goals but also add value to company by their contributions.
  2. Remodeling organizational structure, the structure must be implemented where there is no domination of superiors and culture where employees fear to report his ideas and problems with the higher levels of management must be abolished, which gives them freedom to think and express their ideas.
  3. Careful auditing of accounts, regular monitoring on accounts must be followed.
  4. Reframing and reevaluating the policies in consideration with the market, removing policies which are not work friendly like personnel rotation policy.
  5. Training on ethical practices to be followed in company.
  6. Achievable targets need to be set up to employees by considering their potential and team strengths.
  7. Maximizing profits should not devalue morals of an individual.

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