Toshiba CEO resigns in wake of $1.2bn profit-faking scandal

Tanaka involved in cover-up since 2008

Toshiba CEO Hisao Tanaka has resigned, after it was revealed that he has been involved in an account doctoring scheme that falsely inflated profits at the Japanese technology firm by 152bn yen ($1.2bn) over the past few years.

This resulted in reported profits being almost three times their true value.

Tanaka resigned at a press conference this week, along with his predecessor Norio Sasaki - who was a vice chairman at Toshiba - and Atsutoshi Nishida, one of Tanaka's advisers. All have admitted direct involvement in the scheme.

Apparently, the CEO and his associates were under pressure from senior management since 2008 to turn around the ailing company's fortunes, with unrealistic earnings targets set as ways to face the "challenge" for Toshiba.

Tanaka felt he had no choice but to begin faking results.

On his departure, Tanaka admitted that he and his management team "have a serious responsibility" and that Toshiba will need to "build a new structure" to try and address its operational problems.

Toshiba has apologised to shareholders and has held an externally-led enquiry to investigate how exactly the scheme came about and was maintained for so long.

"There was intense pressure to produce results under ‘The Challenge' initiative," said the enquiry's report.

"So employees felt cornered into resorting to inappropriate measures."

Toshiba's stock actually rose by six per cent after the revelation of the scandal and Tanaka's departure. The company has also reacted by selling its share in Finnish engineering firm Kone, its 4.6 per cent stake going for $946.2m.

Toshiba said jettisoning Kone would aid "efficient use of company group assets" and would "improve its balance sheets".