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Overview of the Accounting Scandal at Toshiba

Question:

Discuss about the Management Theory and Practice for Toshiba.

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).

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 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.

Corporate Culture and Ethics at Toshiba

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.

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. 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).

Managerial Ethics and the Ethical Dilemma Faced by Toshiba

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).

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 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).

Leadership as a Solution to Ethical Issues in Organizations

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 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).

Applying the Concept of Ethical Obligation in Management Ethics

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 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

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 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).

References

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