PELİN AKGÜL MGMT 512 - CORPORATE GOVERNANCE
TOSHIBA CORPORATE GOVERNANCE FAILURE
An outsider investigation report discharged on July 20, 2015, found that Toshiba Corporation had
cushioned its benefits by $1.2 billion over the past 6 years. The present and two old presidents and half of the board of directors have resigned from their positions. At the end of the day we are confronted
with the inquiries of how good Japanese corporate governance practices are and how might they be
improved.
When we compared The Toshiba case to other recent Japanese corporate governance scandals such as the Olympus case in 2011, it was shocking news for two
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Additionally, the report found Toshiba's governance structure relied too heavily on internal
audit as a consulting service rather than as an assurance provider. The audit department focused primarily on providing consulting services to various Toshiba's companies as part of operational audits,
without assessing the appropriateness of accounting processes. While an effective internal audit function
often provides advice and consultancy services for key stakeholders, internal audit will often struggle to address a company's critical risks if little or no assurance is provided to management and the board on
the overall effectiveness of mitigating controls.
Despite a limited focus on assurance, audits by the department twice identified instances of irregularities that could have highlighted the company's accounting problems much earlier. However, they were
dismissed as not significant enough to report.
Besides, more general weaknesses in Japan's corporate governance system that contributed to the
Olympus scandal still remain today. These include relatively weak regulation and little risk of liability
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The inquiry covered 98 current and former
executives. The committee's report said other than the five executives, no one else at the company could "be found legally liable. It is not reasonable for Toshiba to enforce liability for compensatory
damages" against them.
In my opinion, Japan's corporate governance may be aided by a new corporate governance code for
listed companies. Under this code Japanese companies must now report ("comply or explain") with
respect to a long list of governance issues. Although a clear principle recommending a minimum of two
independent directors has claimed much of the attention, other new areas such as director training and
board self-evaluation may have a greater impact on board functioning. It's not easy to get the corporate governance balance right. The first step is a long one to keep trying. To this point, Toshiba's current
challenges are merely ceremonial. It has to take that first step.
REFERENCES
Arens, Alvin A., Elder, Randall J., and Beasley, Mark S. (2012). Auditing and Assurance Services:
Auditors do not provide audit opinions for different levels of assurance. Therefore, auditors consider providing more or less assurance when modifying evidence for engagement risk to be unnecessary. However, auditors should be professionally responsible to accumulate additional evidence, assign more experienced personnel, and review the audit more thoroughly, particularly when a client poses a higher than normal degree of engagement risk. The auditor should also modify evidence for engagement risk when high legal exposure and other potential actions affecting the auditor
Objectivity also needs to be evaluated to make sure the internal audit is reliable. The internal audit needs to be free of conflicting responsibilities as well
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
CEOs and Board Members need to be collaborative in dealing with increasing complexities of healthcare management. Having the correct Boards members could make the difference between a well run managed successful healthcare institution and one that fails. There are many components needed to have to the correct board members. As noted in our book having the correct people on the board is necessary, however the process is more complicated than just selecting those people are felt be “good fits” to be member of a board of directors.
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
Gregory, h. J., 2012. Twelve Key Corporate Governance Issues. Board Agenda, Mon Dec-Jan, p. 29.
Solomon, J (2013). Corporate Governance and Accountability. 4th ed. Sussex: John Wiley & Sons Ltd. p.7, p9, p10, p15, p58, p60, p253.
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The Australian Stock Exchange’s (ASX) Corporate Governance Council (2014) defines corporate governance as “A framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations”. One goal of corporate governance is for the board members to increase shareholder value (Tricker 2015). In order to achieve this, it is important that the board act appropriately and justly so that the best interest of investors are protected. This report will explore the effectiveness of JB Hi-Fi’s corporate governance. JB Hi-Fi is Australia’s largest home entertainment retailer, selling a variety of products at discounted prices. Over the years, they have maintained a substantial
Bartlett, C. A. (2001). Philips versus Matsushita: A new century, a new round. Harvard Business School.
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