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A pedestrian walks past a Toshiba Corp. logo.
”Scandal-muddied Toshiba Corporation recently announced it was terminating its long-time relationship with Ernst & Young ShinNihon, its rubber-stamping auditor, and will hire PricewatherhouseCoopers Arata to replace it.
Mary Jo White, chair of the U.S. Securities and Exchange Commission, speaks at The Economic Club of New York, in Manhattan, June 20, 2014
”The Securities and Exchange Commission’s push to step up policing of accounting fraud could have a lasting impact on the agency’s work, bringing more cases related to poor internal controls and more actions against individuals, a top former official said.
On the link below, you can download S&P's report comparing global financial literacy in various countries. (See definition below.) S&P asked four simple questions about things like how interest works and ranked countries based on the percent of correct responses. At 41%, Japan has a relatively low score among developed nations, which ranks it just above Italy in most respects.
Excerpt:Audit Committee under scrutiny
Toshiba was considered a reform pioneer, first appointing independent directors in 2001. But the company's five-person audit committee – of which two members were former Toshiba executives and two others lacked any business experience whatsover – was a classic study of Japan's corporate insider culture that can often create compliant committees under the thumb of management. …..While the accounting errors probably would have been hard for any audit committee to spot if managers wanted to keep them hidden, this committee composition could not possibly have helped, say Nicholas Benes, Representative Director of the Board Director Training Institute of Japan.
Excerpt: “….. It will be interesting to see what lessons are drawn from Toshiba's failure. Problems with Toshiba's seemingly well-considered hybrid approach to governance clearly illustrate the tension and difficult tradeoffs between insider and outsider perspectives.
Excerpt: “The vast firm, which had sales of 600 billion yen last fiscal year, hired outside directors and adopted a 16-member board a decade ago, among other changes, to “enhance management efficiency and improve transparency”.
Excerpt: “The Toshiba scandal further underlines the need for board training as well as a robust whistleblower protection system,” said Seth Fischer, chief investment officer at Hong Kong-based hedge fund Oasis Management and a corporate governance activist who successfully pushed for reforms at Nintendo Co Ltd.