Toshiba's Accounting Scandal: Management Theory and Practice Analysis

This essay analyzes the ethical dilemma faced by Toshiba, stemming from an accounting scandal involving the overstatement of profits through inappropriate practices. The essay examines the role of leadership and management in fostering a corporate culture that enabled such unethical behavior. It applies theoretical concepts of managerial ethics, including leadership style and ethical obligation, to critically evaluate the situation. The analysis explores how pressure from leadership to meet unrealistic profit targets, coupled with weak internal controls and a poor corporate governance structure, contributed to the crisis. The essay emphasizes the importance of strong ethical leadership and the implementation of ethical practices at all levels of management to ensure long-term business sustainability. It highlights the need for leaders to set achievable goals and foster an environment that encourages ethical decision-making, preventing future ethical dilemmas. The essay concludes by emphasizing the importance of strong corporate governance and ethical leadership in preventing similar ethical breaches.

Running head: Management theory and practice

Management theory and practice 1
MANAGEMENT THEORY AND PRACTICE
2017
Ethical dilemma
TOSHIBA

Management theory and practice 2
Introduction
There is no such right thing an employee can always do in a corporate world. The ethical
dilemmas are bound to happen in the workplace. An ethical dilemma is a situation where there
are multiple options or choice need to be made but neither of the choice is acceptable as
ethically. The recent accounting scandal of Toshiba has been in the news and doing the rounds.
The investigators found out the evidences of inappropriate accounting practices being carried
on by Toshiba to overstate their profits in multiple business units and that brings a financial
crisis globally for Toshiba. The ethical dilemma that arise in Toshiba which resulted in biggest
scandal is being narrated in this essay and is being critically evaluated. The theoretical concepts
have been applied from managerial ethics for the critical examination of the dilemma faced by
Toshiba. The examination and evaluation of the concepts which influences managerial practice
in the said company. Lastly, the conclusion has been made that how leaders may ensure the
organizational decisions being made ethically. This would be a quite complex decision to run a
business ethically and make decisions keeping in mind the ethics to be followed by company
but only after adopting such ethical practices at all levels of management ensures smooth flow
of business for a long term (Carroll, 2014).
Ethical Dilemma faced by Toshiba
The most iconic brand Toshiba being caught up practicing illegal and unethical behavior
by its senior executives including CEOs, they had amplified pre-tax profit in over six years. It
was found in the investigations that the company was practicing unsuitable accounting
practices from long in various business units which includes semiconductor unit, visual
products unit etc. The misconducts of accounts took place in the year 2008 under CEO
Atsutoshi Nishida when a global financial crisis was going rounds that affects Toshiba’s profits
deeply and it continued till the next CEO, Norio Sasaki but ended up in a big scandal when
Tanaka was in position of CEO in the company.
The unsuitable accounting techniques and applications have been employed at different
business units which created a biggest ethical dilemma and also they have booked their future

Management theory and practice 3
profits in advance by pushing back their losses and charges in order to overstate their profits.
The ethical dilemma was seen in the corporate leadership who have set some strict profit
targets or challenges what they say to every business unit leader with an implication of no such
failure will be accepted and the challenge was given at the end of quarter when it became
impossible to fulfill the same as there is no time left to pertinently affect the unit. The valuation
of inventory was found out to be improper which states the profit higher and gives a rise to
fraudulent activities. This situation of dilemma was created in the work environment which
forces the employees of Toshiba to adopt such inappropriate accounting techniques to overstate
profits which was not ethically proven.
The strictness in the corporate culture of Toshiba enables the advent of inappropriate
accounting practice. This culture was prevalent in the every level of management and
accountants as well who are the sole personal to adopt such unethical practice. This whole
situation indicates a weak corporate governance who do not function in the company as it is
required to be. Added to this there was another weak point founded that was poor functioning
system of auditing and internal controls at each level of department in Toshiba. Every division
presented in the business whether it is finance, accounts, risk management or corporate auditing
division the internal controls were poor that they couldn’t even identified the discrepancies in
these divisions and the unsuitable behaviors which lead to such big scandal.
Application of theoretical concepts of Managerial Ethics
Managerial ethics are a set of principles that are guided by upper management for the
conduct by managers to operate in the workplace. These principles and rules govern the
behavior of a person in an organization with an instance of right and wrong. Now there are
various types or theoretical concepts which can be applied to examine critically the dilemma
experienced by Toshiba. By applying these two concepts of managerial ethics can provide
mechanisms which protect employees from the ethical dilemma and improves the work in the
organization. As per the ethical dilemma faced by Toshiba indicates the fault in leaders, they
are the sole characters who forces their workers and employees to complete impossible targets
in a less amount of time certainly this pressure of work makes them adopt such unsuitable
practices in accounting to showcase the profits which was expected from them by their leaders.

Management theory and practice 4
Here the concept of leadership who follows ethics while decision making for the organization
can be applied (Ferrell, 2015).
Leadership style a concept of managerial ethics is one of the effective style to improve the
ethical issues arise in organization at any level (Shin, 2015). With leadership everyone is aware
about what a leadership is about, it basically involves telling employees what needs to be done
and how it is to be done in order to achieve targets. Leader has to see how they can get their
work done by the time and get their best out of abilities and work to be performed ethically. By
applying leadership concept in managerial ethics to examine the ethical dilemma faced by
Toshiba, a leadership is an important role played by leaders of the organization at all levels for
a successful management. To avoid dilemma in the critical work situations a strong leadership
is required to be followed to influence employees and the workforce towards an achievable
goal and be guided at each point of stage. As mentioned above the scandal which takes place
leader has given unachievable target to their employees, the qualities of strong leaders are
varied they just don’t command but they lead their team keeping in mind their abilities to do
particular work and set objectives which are achievable. When the command goes wrong in the
heads of employees it forces them to adopt such malpractices to keep themselves secure in the
organization (Johnson, 2017). The situation when they are being forced to work hard but in the
time being where materiality affects it is not possible for them to perform ethically, such
circumstances lead to stress over the employees and creates complexity in the environment they
are left with no option but to work unethically which promises to work in their best resulting
achievement of objectives set by their leaders. The ethical dilemmas created by the leader itself
impose a bad image in the eyes of workers and employees but also in society which is again not
acceptable on the other hand not suitable though for the long term plans of staying in the
market (Moghadam, 2016). Leadership defines a company and develops a trust relation with
the employees, third party holders lastly the society. A leadership style gives a way to a leader
that in what direction he has to go with his team, what traits he needs to adopt and follow in
order to achieve targets. There are various styles available for leaders depending upon their
abilities, attitude towards work situations, their philosophy and experience to lead, these factors
help a leader to align with the leadership style which suited the best for the organization and
proves to be beneficial in the later years of success (Dzuranin et al., 2013).

Management theory and practice 5
Another theoretical concept which can be applied from managerial ethics to improve the ethical
dilemma which was seen in Toshiba is ethical obligation. As we all know management ethics is
an intermediate between occupational and organizational ethics, it emphasize on managers to
control, plan, organize and coordinate in order to manage all these sort managerial ethics need
to be applied with an ethical obligation. The ethical issues presented in relation to such parts
and roles played by managers should be considered while planning and decision making for the
organization as these issues would affect in future regarding profitability and long term plans of
staying in market. Application of ethical obligation makes sure that organization is running by
ethical disciplines who adopts ethical values in both factors internally and externally also their
decision making. It was clear in the accounting scandal by Toshiba that internal control were
poorly worked as they did not fulfill their duties aligned to them and failed to spot frauds and
errors in the accounting techniques as well as financial statements which was over stated by
profits, pushing back losses and bank charges (Fleischman et al., 2017). This fraud could have
been detected easily by the auditors but they did not follow the procedure or applied ethics
discipline in their work, let go off with what so ever was happening knowingly. The
carelessness in this regard resulted into such big fraud creating financial crisis globally. Moral
values are the sole element while performing different activities at all levels of management
who would decide what is wrong and what is right in a given situation, avoid ethical dilemma if
it occurs in such situation. Ethical obligation is almost same for every organization not much of
change is required to be made in it while applying in various units, the ethical behavior
influences personnel to work in accordance with the disciplines and rules made in order to
legalism. Even the auditors need to follow ethical obligation and rules to abide by that there
won’t be any chance in occurrence of errors and frauds (Ehrich et al., 2015).
Concepts influencing managerial practice in Toshiba
Toshiba is one of the renowned brand which was being caught in the biggest scandal in
past years in accusations of unethical behavior by its CEOs. The revelations about the scandal
was overstating the profits by pushing back all losses and few charges, they happened to be
following unsuitable or inappropriate accounting practices. This situation indicates a poor

Management theory and practice 6
corporate culture in Toshiba that made employees and workers to adapt illegal behavior in their
accounting techniques. They did so, to fulfill the command given by their leaders which seems
to be an impossible task to complete with. Here the ethical dilemma faced by employees and
worker of the organization was being forced by their superiors to work on an impossible and
unachievable target within a less amount of time. They were being threaten indirectly by their
leaders to achieve those high targets and the failure to do so will not be accepted, when a leader
poses such image in the minds of employees it no longer seems to be a good leader which can
be seen resulting into scandals the company is facing (Vardaman, 2014).
In order to improve such poor corporate culture in Toshiba where all the levels of management
used the norm of going along with getting along and carried out inappropriate accounting
practices continually. Leadership in managerial ethics would help out to improve such work
culture and lead the team in an ethical way also encourage them to adopt ethical practices while
working on their objectives (Gross, 2015). A strong leader only with positive attitude,
philosophy and experience can lead a team without creating any such issues. In managerial
ethics leadership is of an important aspect, a leader is the one to whom everybody follows and
listen by getting their work done which turns the expectations into reality. A strong leader who
promises to follow ethical behavior in the practice at all levels of management and keep a
check on the activities continually. In Toshiba leaders poses a bad image by commanding them
some unreal targets at the end of each quarter where there is no time to affect materially. Here
leader themselves forces their team to go for unethical or illegal practices to meet their targets
on time. The auditors even fail to detect errors and frauds in the account and finance
department there it truly shows how weak and poor their internal control system are working. If
auditors would have found out the inappropriate practice happening in the accounting
techniques applied, the situation of this big scandal could have been avoided at an earlier stage
only when it all began in 2008 in a global financial crisis (Du, 2017). The overstatement of
profits for future and pushed back losses and bank charges can be found out way easier as it
sounds but auditors ignored this fact to support leaders in their plan which gives rise to
continue the process of adopting false accounting techniques to mark their success. This short
term success has blinded leaders to carry on till it works for the best for them. The blindness
motivates them too command the same to their employees and employees as well as workers

Management theory and practice 7
get used to such practices in the meantime that they no longer feel the situation of ethical
dilemma it becomes the regular thing to carry on such practice (Schniederjans, 2015). When
employees are aware of the things they are doing was wrong and adopted unethical behavior in
every aspect at every business unit it ultimately maligned the whole organization and it is no
longer holding the position of an ethical business globally (May, 2014).
After seeing such downturn in their business the leadership style of managerial ethics becomes
the talking point in their organization to improve the current situation where they loss their
goodwill in the eyes of public and competitors as well. The power is in hands of leaders to turn
the situation around and bring its positive side. After applying a strong leadership in the
management which consist of occupational ethics, legalism, managerial ethics and these
divisions helps a leader to apply ethics at each department present in the organization to avoid
situation of ethical dilemmas there (Greer et al., 2015).
Another theoretical concept which can influence managerial practice in the organization
(Toshiba) would be Ethical obligation or another synonym of the same would be Legalism.
There are few domains of managerial ethics or human action namely Legal standard, Social
standard and Personal standard. In these domains ethics lies in between yet it has no specific
laws but have standards of conduct which are based on various rules and principles in reference
to moral values. An unethical behavior clearly violates such moral conduct which are
punishable in nature. These above mentioned domains has a defined level of control form high
level to low level, the personal standard considered to be an low level of explicit control as it
require to maintain a personal standard rather following any prescribed law the question arises
here what could be the intensity of an personal standard as compare to legal standard where
rules and regulations are framed keeping in mind the organizational nature (Li, 2017). The
personal standard contains no such limitations as it is their own criteria to think what is right
and what is wrong in a given situation they apply their philosophy which gave no guarantee of
accuracy of the decision made according to it. Secondly, social standards contains mid-level of
accuracy as these standards are made based on social conduct of values and moral. Whatever
decision made by leaders following social standard known to be a domain of ethics is in the
favor of society and not organization, it make sure that actions are taken keeping in mind that

Management theory and practice 8
they don’t harm society in anyway With all its pros, there are few cons along with it for
example if Toshiba follows social standards and take actions keeping in mind the society but at
the same time the actions taken affect organization in less beneficial way. Lastly, there is a high
level of accuracy contained in Legal standard which is known to be a domain of codified law
where laws and disciplines are set in the alignment with every organization (Pollock, 2014). It
is the best suited concept for Toshiba to improve their situation of ethical dilemma, the poor
corporate culture and weak internal controls can be enriched by adapting legal standard in the
managerial ethics. After studying all these concepts it is being clear that ethical obligations
seems to be a good option to adopt by Toshiba which can result positively in the coming time
for a longer term. It does require a span of time to hold a good position back in the global
market as it is no easy task to obtain goodwill after such a big scandal. It only works for the
betterment of the company (Ford, 2013).
Conclusion
The traditional ethical attitude to prevent ethical dilemma occur in organization at various
levels of management is of the noticeable talk of the point currently. After studying the scandal
that Toshiba has faced in past years, it is concluded that the reason behind such scandalous act
was not one but many. There were faults and breaking of law at every department whether it is
top level managers or low level management. The bad corporate culture and poor internal
control drew attention of the investigators while investigating the case as these two factors are
the holding pillars of the management who would take the whole business to different levels
(Guiso, 2015). Leaders play the key role in influencing people working in an organization to
work in an ethical manner, where in Toshiba it is evident how leaders have forced their
employees to work in a way for some unachievable goals which ultimately forces them to adopt
illegal practices in order to save themselves from the leaders and couldn’t risk their jobs. This
ethical dilemma took organization to such big issue where they lose their position in the global
market. By studying the case and critically analyzing the theoretical concepts of managerial
ethics it is a clear picture that how these concepts would influence managerial practice in the
organization (Ruiz-Palomino, 2013). The illegal practices can be stop by applying these
mentioned concepts by the leaders in the organization at all levels of management it helps in

Management theory and practice 9
removing the doubts and dilemmas faced by employees in the work environment. The
importance of a strong leader has been showcased in the essay which leads the organization
into more ethical way. It is no easy task to execute steps and apply ethics in management in
reality but efforts can be made to at least follow the norms which can improve the corporate
culture of a company (Goetsch, 2014).
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