Toshiba’s-Corporate-Re-Launch

Toshiba’s Corporate Relaunch?

Building on my earlier pieces and expert comments on problems that corporate Japan is facing (see below), take note that Toshiba, the venerable 143-year-old industrial conglomerate and former powerhouse with world-beating innovative products, has recently appointed a new CEO, Nobuaki Kurumatani.

To a few commentators, he may seem an ‘outsider’, at least in Japanese terms as it is only the second such appointment in the past 50 years to its top leadership – unusual for Japanese conglomerates where executives typically spend decades working their way to the top. He is, also, not from the electronics space but a life-long banker with no experience of manufacturing (in 1965, it was Toshio Doko, an engineer).

To a few commentators, he may seem an ‘outsider’, at least in Japanese terms as it is only the second such appointment in the past 50 years to its top leadership – unusual for Japanese conglomerates where executives typically spend decades working their way to the top.

However, this point cannot be pushed too far as diversity remains lacking: he is Japanese, male, a graduate of Japan’s top elite university. Tokyo and Japanese firms, in general, regularly turn to executives from banking when in crisis. Indeed, he has also been on Sharp Corp.’s board since June while Sumitomo Mitsui and Mizuho Financial Group Inc., Toshiba’s main banks, played a key role in negotiating the sale of the chip business and his network spans business, politics and policymakers.

If Prime Minister Abe really wants to reform corporate governance, then truly independent (with no links to the business) directors need to be foisted on companies. It will be very interesting to see what happens in practice given the continuing traditional organisational culture and governance regime prevalent in corporate Japan, which stems from deeply embedded societal and institutional structures.

The challenges the new CEO faces are manifold, complex and difficult. These include reviving Toshiba’s reputation for technological innovation and good corporate governance. This is especially relevant given the PR disaster of the earlier accountancy scandal driven by excessive profit demands. At the same time the new CEO will need to repair Toshiba’s balance sheet, re-evaluate its business portfolio in the context of shifts to lower profit margin businesses, oversee the sale of its prized flash memory chip unit and manage the risk of possible de-listing from the Tokyo Stock Exchange in the context of an earlier report that stated: ‘Within Toshiba, there was a corporate culture in which one could not go against the wishes of superiors’.

 

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