Vantage | What caused electronic giant Toshiba's decline?

Japan, known for its technological prowess, recently witnessed the fall of one of its corporate giants – Toshiba. With a history spanning 74 years on the Tokyo Stock Exchange, Toshiba was delisted and transitioned into a private entity, owned by a consortium led by Japan Industrial Partners (JIP), a private equity firm.

Toshiba, once a Japanese powerhouse with a 150-year legacy, faced a series of challenges that led to its dramatic downfall. The story begins in 2008 when the global financial crisis struck, affecting businesses worldwide. Unlike many companies, Toshiba opted for dishonest practices, indulging in accounting malpractices to mask its losses and present a facade of profitability. Worsening the situation, Toshiba overstated its operating profits by a staggering $1.2 billion over eight years, until 2015. The accounting scandal, once exposed, shattered public faith in the company, marking a severe blow to its reputation. Successive CEOs oversaw this period of financial deceit. Management failures Investigations revealed that while the leadership did not explicitly instruct accounting malpractices, they exerted pressure on subordinates. This, coupled with Japan’s corporate culture emphasising obedience to superiors, contributed to the tainted results and showcased the pitfalls of bad corporate governance. In 2016, Toshiba faced another stroke of misfortune. Its US subsidiary committed to constructing a $7 billion power plant, a move that ultimately led to the subsidiary’s bankruptcy later that year. Left with a massive loss and plummeting share prices, Toshiba initiated damage control by selling off valuable assets such as its mobile phones business and medical systems. External interference and power struggles To mitigate its financial woes in 2017, Toshiba sought a bailout from foreign investors. However, this move invited external interference and demands for change from these overseas stakeholders. A power struggle ensued, exacerbated by alleged collusion between Japan’s trade ministry and Toshiba to suppress foreign investors. The company, once considered a critical asset by the Japanese government, found itself in chaos, unable to recover. The Toshiba saga serves as a cautionary tale, emphasising the importance of honesty in corporate practices. During challenging times, companies must resist the temptation of resorting to shady accounting. The fallout from such practices can be severe, potentially leading to the downfall of even longstanding organisations. Toshiba’s journey from a Japanese technological powerhouse to a privately owned entity reflects a narrative of bad luck, mismanagement and external interference. As it transitions into a new chapter, the lessons learned from its downfall underscore the significance of ethical business practices and transparency in the corporate world. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.