1. ASSIGNMENT COVER SHEET
Student Name: Alexandra Parsons, Jessie Novak, Gregory Lewin, & Sudket Fraser-
Krause
Student no.: 4008817, 4007517, 4006441, 4006038
Subject Code: MGT320
Subject Name: Business Ethics
Lecturer/Tutor: Leslie Goldmann
Assignment Title: Group Assessment Two
Word Count:
Due Date: Week 10
I am aware of ICMS policy on plagiarism as stated in the ICMS Student Handbook. This
assignment does not breach those requirements nor has it been previously submitted for
assessment contributing to any other subject or course. The ideas and information that are
not mine have been referenced accordingly.
Signed: Alexandra Parsons, Jessie Novak, Gregory Lewin, & Sudket Fraser-Krause

2. Table of Contents
1. Introduction……………………………………………………………………………..…2
2. How and why is Toshiba failing to adhere to business ethics.............................................3
3. Ethical responsibilities, standards, and values compromised………………………….….4
4. Primary causes and alternative scenarios………………………………………….……5-6
5. Outcomes and key lessons……………………………………………………………...6-7
6. Conclusion…………………………………………………………………………….......8
7. References………………………………………………………………………..,…...9-11

3. Introduction:
Toshiba, a respectable leading global electronics and industries company, that was “ranked ninth
out of 120 publicly traded Japanese companies with good governance practices” (Carpenter, W.
2015) was involved in the one of the largest unethical accounting scandals in 2015. In the
beginning of September, Toshiba announced an ‘accounting adjustment’ of $1.9 billion, more
than four times the original estimate in April, when the problems initially began to come to the
surface. Toshiba's problems extend back for seven years, and have cost CEO’s and other
executives their jobs. Toshiba’s top executives, “had padded pre-tax profit by at least 152 billion
yen ($1.2 billion) over six years, according to a third-party accounting probe, and created a
culture based on the premise “get it done like your life depends on it” (Singh, 2015). It is evident
that the organisation's structure and pressure from top executives influenced many senior, middle,
and line managers to act unethically when reporting numbers and left little belief that
organisational justice exists. The company ended up encountering a fine that would be, “the
biggest ever in Japan for accounting-related violations” (Fukase, A. 2015), a decline in the
companies share price, and had many shareholders sue for compensation.
How and why is Toshiba failing to adhere to business ethics:

4. This case specifically illustrates a failure of business ethics when it comes to deontology, which is
our duty to comply with what is morally right and that it is our duty to govern our will. When
utilizing deontology, there are some actions that must never be done, no matter their possible
benefit or consequences. Toshiba managers utilizing inaccurate accounting practices to meet their
target number on reports and both CEO’s creating an extremely detrimental company culture are
definitely two of those actions. Within Toshiba’s Code of Conduct it is stated that they will
provide “prompt release of accurate accounts” (Toshiba Corporation, 2015b), which they failed to
do for years.
Furthermore, under the justice framework, where people have rights to be treated fairly, it
is evident that Toshiba employees and shareholders were not treated fairly. As John Rawls
believed with his veil of ignorance, there should always be equality of opportunity for all
involved. Within the Toshiba case, managers were forced to adapt to a ‘fake it or we will replace
you and find someone who will’ culture and shareholders were mislead that the company was
doing well in the market, completely blinded of what was going on behind the scenes as their
“share price began to tumble” (Boyd, 2015).
Also, potentially egoism of both CEO’s may have been used, as they were putting their
own welfare above that of others, and it could have triggered this sandal. But that is difficult to
determine as Japan is still unsure where or who the excess funds went to.
Where do the ethical responsibilities lie? What are the ethical standards and underlying
moral values that have been compromised?
Everyone working for Toshiba has the responsibility to act ethically. For the Toshiba scandal, the
individuals that should be held accountable for the ethical responsibilities lie on every level

5. throughout the company from the CEO’s right down to the accountants. The problem initially
stemmed from the current and previous two CEO’s, Hisao Tanaka, Atsutoshi Nishida and Norio
Sasaki, all of which have now resigned. The immense pressure from Toshiba’s corporate
leadership onto the business unit presidents to meet profit targets is what ultimately led to the
fraudulent accounting practices. (Carpenter, 2015).
The investigative panel into the scandal noted that Toshiba’s ineffective internal controls,
methods to ensure integrity in accounting information, and poor corporate governance also should
be held responsible for not identifying and stopping the inappropriate behaviours. As well as, a
poor corporate culture from Toshiba, demanding obedience from subordinates to superiors to
achieve their profit targets, as failure was not an option (Carpenter, 2015).
Therefore, the ethical standards that have been compromised include the company’s internal
controls and corporate governance. As for the underlying moral values, the individuals
compromised their integrity, empathy and respect. The responsibilities lie with everyone working
for Toshiba to work ethically. The CEO’s should have lead by example, bringing in a strong
corporate culture with efficient internal controls and corporate governance to ensure that every
individual, on every level within the company is working ethically. Maximising profits should not
comprise the individual’s moral values.
Primary causes and alternative scenarios
Primary causes:
Toshiba faced one major underlying issue that many large corporations face, that is, pressure to
show profit. Firstly, two former CEOs of Toshiba (Atsutoshi Nishida and Norio Sasaki) laid
immense pressure on business unit presidents to exemplify a large profit margin through meeting

6. sale objectives following the global recession in 2008 (Du, L. 2015). Consequently, failure was
not an option, employees were forced to do improper accounting by postponing loss reports or
moving certain costs into later years in multiple business units. Thus, leaving the company with
little belief that organisational justice exists relating back to failure of deontology.
Secondly, Toshiba’s corporate culture came under scrutiny when it was discovered that superiors
had ‘demand obedience’ to follow the companies authority on targets. Therefore allowing the
materialisation of fraudulent accounting practices (Carpenter, W. 2015).
Lastly, both causes were controlled by poorly functioning internal systems due to weak corporate
governance. Turning to Japan’s corporate governance dilemma, where the country is fixed
between its traditional model and the American model both consisting of board directors
managing corporation movements and supervision of management (Aronson, B. 2013).
Furthermore, poorly functioning internal systems could be stated as non-existent due to Toshiba’s
president Hisao Tanaka and his two former CEO’s manipulating what internal processes were left
recognisable, which consequently leaves no internal processes to stop them (Nagata, K. 2015).
Alternative scenarios:
Toshiba could have acquired ‘independent directors’ that are not influenced by senior
management, as they work with the corporate governance to offer an unbiased input to the
running of the company. Therefore, if the company has deficiencies at a senior management level
the internal management of the company does not influence them. Furthermore, the company
could have developed an, ‘internal ethics committee’, which would act as a tribunal to receive
complaints or documented issues for review. To conclude, Toshiba could have utilised ‘third

7. party auditors’, that is, Price Waterhouse or KPMG. That should have theoretically highlighted
problems within the system.
Outcomes and key lessons
Outcomes:
The 2015 scandal impacted Toshiba’s business, stakeholders and the communities worldwide.
The outcomes for the business Toshiba in late 2015 have been: a decrease in share price, an
annual loss of $4.5 billion dollars in 2015 (The Financial Times, 2016), reduced volumes in TV
and PC production estimated at 3 million units, a loss of reputation, closure of divisions within
the company (health care business, home-electronics/appliances and chip division).
Stakeholders:
The major stakeholders for Toshiba are customers, (not only individual consumers, but also
government and public bodies), employees, managers, the board, shareholders, suppliers and the
community (Toshiba Corporation, 2016a). The closure of divisions and the restructure of the
organisation resulted in reduced product availability, loss of employment (estimated at 7000
employees) and reduced share price. The closure of plants impacted suppliers and local
communities where increased unemployment affected families and local economies.
Key Lessons:

8. The key lessons of this case are that Toshiba’s top executives clearly acted in an
unethical way and based on the right approach framework, Goldmann (2016, slide 4)
states that their actions did not protect or respect the moral rights of those affected, i.e.
the stakeholders. Although, the company results showed positive performance for a
number of years, eventually when caught, the incorrect reporting ruined the company’s
business with huge financial losses and a loss in ethical reputation with their employees,
shareholders and the community. Changes to corporate governance and transparency in
reporting will help to prevent this type of incident in the future (Russel, 2015, para. 4),
however if a business is undertaking an unethical approach and gets caught, such as
Toshiba, there are huge ramifications for them which will eventually impact their
business and key stakeholders.
Conclusion:
Organisations must be aware of their ethical practices with their employees, shareholders and the
community as it influences their culture and reputation. By utilizing the rights approach,
deontology, the justice framework, and egoism it is evident that Toshiba's organisational structure
and pressure from top executives was overwhelming for employees. Also, it’s essential that
organisations report accurate figures to avoid a similar situation arising again that negatively
impacts all of their stakeholders.

9. References
Aronson, B. (2013). The Olympus Scandal and Corporate Governance Reform: Can Japan Find
a Middle ground between the Board Monitoring Model and Management Model? Retrieved July
19, 2016, from https://sydney.edu.au/law/anjel/documents/2013/ZJapanR35_05-Aro
nson.pdf
Boyd, J. (2015). Key questions in Toshiba scandal still unanswered. Retrieved July 18, 2016,
from http://www.aljazeera.com/indepth/features/2015/10/key-questions-toshiba-scandal-
unanswered-151011075457531.html
Carpenter, W. (2015). Toshiba’s Accounting Scandal: How it happened. Retreieved July 19,
2016, from http://www.investopedia.com/articles/investing/081315/toshibas-accounting-
scandal-how-it-happened.asp

10. Du, L. (2015). 5 Things To Know About Toshiba’s Accounting Scandal. Retrieved July 19, 2016,
from http://blogs.wsj.com/briefly/2015/07/21/5-things-to-know-about-toshibas-accounting
-scandal-2/
The Financial Times. (2016). Toshiba shares fall 12% after warning of record $4.5bn loss.
Retrieved from https://next.ft.com/content/f985af4a-a78e-11e5-955c-1e1d6de94879
Fukase, A. (2015). Toshiba Accounting Scandal Draws Record Fine From Regulators. Retrieved
July 18, 2016, from http://www.wsj.com/articles/toshiba-accounting-scandal-draws-record
-fine-from-regulators-1449472485
Goldmann, L. (2016, July). Business Ethics. Lecture presented for MGT320 at ICMS, Sydney,
NSW.
Nagata, K. (2015). Pressure to show a profit led to Toshiba’s accounting scandal. Retrieved July
19, 2016, from http://www.japantimes.co.jp/news/2015/09/18/business/corporate-business
/pressure-to-show-a-profit-led-to-toshibas-accounting-scandal/#.V43bmFdYn-Z
Russel, G. (2015). Will Toshiba’s scandal bring about the change needed in corporate
governance?. Retrieved July 20, 2016, from http://www.gaaaccounting.com/toshiba-scandal-
corporate-governance/
Singh, M. (2015). Toshiba Accounting Scandal: A Corporate Culture Problem. Retrieved July 18,
2016, from https://blogs.cfainstitute.org/marketintegrity/2015/10/30/toshiba-accounting-
scandal-a-corporate-culture-problem

11. Toshiba Corporation. (2016a). Stakeholders. Retrieved July 19, 2016, from
http://www.toshiba.co.jp/csr/en/engagement/stakeholders.htm
Toshiba Corporation. (2016b). Toshiba Group Standards of Conduct. Retrieved July 18, 2016,
from https://www.toshiba.co.jp/csr/en/policy/soc.htm