Toshiba scandal is another blow to Japan's Corporate Governance codes
Another of the world's biggest accounting scandals surfaced when Japan's Toshiba joined the long list of massive corporate financial scandals, which include BCCI, Enron, Lehman, and Olympus. The scandal at Toshiba has worried global investors due to the corporate governance issues with antiquated oversight of top managers, as companies have cooked the books throughout history and worldwide.
Accounting scandals often happen, because there is pressure on corporate executives to meet short-term market expectations and the share price performance based on the balance sheet of the company. That was one of the conclusions during the biggest collective financial scandal is the credit crisis of 2007 and 2008. Also, the corporate leaders o the board of directors of banks such as Royal Bank of Scotland and Lehman Brothers were deemed to be incompetent, deceived or victims of 'black swan' events.
Bonuses and share options are often linked to hitting particular targets, and these pressures may entice executives to engage in creative accounting. Companies can also manage their operations by delaying investments or selling assets to reach individual goals. As long as there are market pressures, we can expect some firms to resort to creative accounting to shore up their performance were some of the conclusion in the various reports from the financial crisis.
Other big scandals include:
- The Bank of Credit and Commerce International, aka the Bank of Cocaine and Criminals International, specialised in widespread fraud and money laundering (1991). It went bust owing more than £10bn to its creditors. The collapse helped spur reform of UK corporate governance to keep a check on company management.
- The world's most infamous accounting scandal was the bankruptcy of Enron in 2001. The company imploded, wiping out $74bn of shareholder funds and the pensions and jobs of thousands of employees. Sarbanes-Oxley was introduced to avoid further scandals. Enron's auditor, Arthur Andersen, also collapsed.
- In 2002, Tyco International's bosses were found to have siphoned hundreds of millions of dollars out of the maker of electrical, healthcare and safety equipment. Much of the plundered money was used to fund the lavish lifestyle of Tyco's chief executive, Dennis Kozlowski.
- A $1.7bn fraud at Olympus (2011) by the camera maker's British chief executive who acted as a whistleblower. Olympus's previous management had buried losses for 13 years.
- Tesco, Britain's biggest retailer, stunned the market last year when it revealed that it had overstated estimated profits by £263m by overestimating revenues paid to it by suppliers.
At the 9th annual European GRC Summit, the keynote speaker is Mr. Jeffrey Avina, LLM, Citizenship and Community Affairs Middle East and Africa, Microsoft, will address the global Corporate Social responsibility, governance, compliance and accountability issues
- What are the biggest challenges that affect the business environment and the business-enabling environment?
- A review of key challenges that face Companies operating in the region and advances that have been occurring to improve good governance on the public sector side which can build a better enabling environment for existing and potential investors.
- A highlight of some of the business cases
Source: The Guardian, The Financial Times.
