Toshiba lawsuit highlights Japan governance reform still lacking: lawyers

Thu Nov 12, 2015 12:09am EST
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By Makiko Yamazaki

TOKYO (Reuters) - Toshiba Corp's (6502.T: Quote) lawsuit against former executives linked to a $1.3 billion accounting scandal is a defensive maneuver that highlights a lack of sincere reform, lawyers and corporate governance experts said.

The 300 million yen ($2.44 million) in damages Toshiba is seeking pales in comparison with the over $7 billion decline in its stock market value since the accounting problems came to light in early April.

Moreover, lawyers said, Toshiba has yet to fully explain why it is limiting its lawsuit to just five former executives, effectively absolving some current officials who were in senior roles during the years it was padding profits.

Such doubts highlight worries that Japan's newly-implemented corporate governance guidelines could fail to bring about substantial improvements in management accountability.

The laptops-to-nuclear conglomerate said on Saturday that it sued five former executives, including three former CEOs, for mismanagement. The move came after an individual investor threatened to sue executives including current CEO Masashi Muromachi, unless Toshiba did so itself.

"What investors are most concerned about is whether the current top executives, including the chairman and CEO, are responsible ... It feels strange that the company has not touched on why the current CEO is not held accountable," said Nobuo Gohara, a lawyer who took part in an audit of Olympus Corp (7733.T: Quote) after its accounting scandal in 2011.

"You can't really say we're seeing better corporate governance at work when the company has sued just so that it won't get sued."

The unnamed investor had demanded that Toshiba sue 28 former and current executives including Muromachi for 1 billion yen in damages. Yoshihiko Kin, a lawyer representing the investor, said the lawsuit, while better than nothing, was lacking.   Continued...

The logo of Toshiba Corp is seen at its headquarters in Tokyo, Japan, November 6, 2015. Japan's Toshiba, struggling with a major accounting scandal, is trying to sell down a $7.4 billion commitment to U.S. liquefied natural gas (LNG), which it signed two years ago as part of a plan to sweeten sales of turbines for power plants. REUTERS/Yuya Shino