TOKYO — Few companies in Japan have conveyed respectability like Toshiba, the sprawling industrial conglomerate that, to the surprise of many here, has found itself at the center of one of the country's largest accounting scandals.
Toshiba's chief executives have for decades sat at the apex of Japan's establishment — civic leaders as much as business managers, in many people's eyes. One boss from the 1990s went on to run the Tokyo Stock Exchange, then the national postal system.
On Tuesday, in defiance of that image, chief executive Hisao Tanaka and two of his predecessors resigned, along with several lesser executives, over accusations that they drove the company to overstate its earnings by $1.2 billion over the past seven years. The figure is equal to about a third of the pretax profits that Toshiba reported during that period.
The Toshiba scandal has raised questions about efforts by the Japanese government to improve corporate governance and culture.
Last year, the government introduced a new set of guidelines for managers and institutional investors. Superficially, Toshiba met or surpassed most of its provisions, which cover things like the number of independent directors companies are expected to employ.
"Toshiba satisfied the formalities of the code, but not the quality," said Toshiaki Oguchi, a governance expert who helped the government create the guidelines.
Doubts about Toshiba's financial reporting have grown since April, when the company, prompted by an investigation by financial regulators, said it was examining possible accounting inaccuracies in one of its divisions. An internal investigation initially found tens of millions of dollars of bookkeeping discrepancies — and the amount quickly ballooned.
On Monday, a committee of independent experts hired by Toshiba said it had found an additional $1.2 billion of overstated earnings. There were problems in virtually all corners of its business, which encompasses products stretching from refrigerators to nuclear power plants.
The company's problems, the investigative panel found, date to the economic slump set off by the global financial crisis in 2008. Even as demand for Toshiba's products fell, top executives insisted that managers meet increasingly difficult profit goals, according to its report. Under pressure, many resorted to accounting gimmicks and shortcuts, the committee said.
The committee accused Toshiba of breeding "a corporate culture where it is impossible to go against one's bosses' wishes."
Senior executives were singled out for blame. The committee said it had discovered "systematic involvement, including by top management, with the goal of intentionally inflating the appearance of net profits." Toshiba financial officials, it said, had "deliberately provided insufficient explanations to auditors, with the intention of carrying out a systematic coverup."
At a news conference at Toshiba's headquarters attended by several hundred journalists and financial analysts, CEO Tanaka bowed deeply in a show of remorse. "I apologize from my heart to all our stakeholders," he said. He acknowledged that the company had engaged in "inappropriate accounting," but said it had not done so intentionally.
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The resignations removed half of Toshiba's 16-member board. Among those stepping down are Norio Sasaki, Tanaka's immediate predecessor as chief executive, who is now Toshiba's vice chairman; and Sasaki's predecessor, Atsutoshi Nishida, who will cede his nonexecutive position as senior adviser. Toshiba's chairman, Masashi Muromachi, will take over as president and chief executive until a new leader is appointed in September.