CEO of Japanese tech giant Toshiba and six other high-ranked executives have resigned on Tuesday after an independent investigation revealed the troubled firm’s management was aware of financial cover-ups discovered earlier this year.
The development concludes the biggest scandal in Japan’s corporate world in recent years, which broke out in April after it was revealed that the firm’s employees had been faking financial books to pretend the consortium had been making more money than it actually was.
According to the investigation, Toshiba’s employees added overall 151.8bn yen (£784.2m) to the actual profits since 2008.
The cover-up was reportedly prompted by Toshiba’s top managers putting extreme pressure on subordinates to meet unrealistic business targets they set as part of Toshiba’s ‘Challenge’ initiative.
Toshiba, whose business range includes electronic components, information technology, power systems as well as nuclear technology, has been struggling on multiple fronts in recent years.
"There was intense pressure to produce results under 'The Challenge' initiative," the report said. "So employees felt cornered into resorting to inappropriate measures."
The inflation of profits to meet targets was carried out not only on one or two projects, but across the board, sometimes because the projects were not even breaking even, according to the investigation report.
At the beginning of the press conference to announce his resignation, CEO Hisao Tanaka bowed deeply in front of the present crowd to show shame and regret.
"We have a serious responsibility," Tanaka told reporters, adding that the company will need to "build a new structure" to reform itself.
Tanaka will be replaced by Masashi Muromachi, the current chairman of the board.
Tanaka's predecessors, Norio Sasaki, now a vice chairman, and Atsutoshi Nishida, an adviser, also gave up their posts.
Following the resignations, Toshiba shares rose 6 per cent as investors took the news as a sign that the company might right itself. Since April, Toshiba's shares lost about 27 per cent of their value.
The scandal is a reminder that Japan’s efforts to improve corporate governance are still in its early stages.
In 2011, optical equipment manufacturer Olympus was caught in a similar scandal after its British president Michael Woodford blew the whistle on the company's cover-up of losses.