1. What does the information presented in the minicase suggest about goal setting at Toshiba?
2. Discuss the issue of process loss in the events described in the minicase.
3. What are the major lessons to be learned from the mini- case about corporate governance?

The global financial crisis adversely impacted a great many firms. One example is the Japanese conglomerate Toshiba. Toshiba is over 140 years old, and consists of many different businesses and divisions whose products include refrigerators, nuclear power plants, electric power lines, iPhone parts, personal computers, and hard drives. Over the years Toshiba came to be well regarded for the quality of its products and the quality of its corporate governance. As with many Japanese firms, it was also respected for its social values, wherein it chose not to terminate losing projects in order to preserve jobs for some of its workforce.
Beginning in 2008, two shocks negatively impacted Toshiba’s business. The first was the economic downturn associated with the global financial crisis, and the second was the combination of an earthquake, tsunami, and nuclear disaster that occurred in 2011. Nevertheless, the firm managed to report respectable earnings in the wake of these shocks.
In 2014, Japanese Prime Minister Shinzo Abe initiated policies to attract more foreign investors to Japan, in an attempt to stimulate the country’s economy. One of his key provisions involved changes in corporate governance, such as requiring publicly traded companies in Japan to have at least two outside independent directors on its board. Toshiba met or surpassed most of these policies by, for example, having four outside directors on its 16-person board.13 In April 2015, an investigation by financial regulators found accounting inaccuracies at Toshiba. Initially these were thought to involve tens of millions of dollars of book- keeping discrepancies, but isolated to a single division. Toshiba then hired a committee of independent experts, who reported in July 2015 that the discrepancies were widespread across the company, and that Toshiba had over- stated its earnings by $1.2 billion between 2008 and 2014. In particular, the company had understated costs on long- term projects and had misvalued some of its inventory. From the time the issue had surfaced in April, Toshiba’s stock had fallen by 25 percent.
The independent experts’ report pointed out that as demand for Toshiba’s products fell, its CEOs had subjected subordinates to intense pressure in order to meet sales targets, with the pressure usually coming just be- fore the end of a quarter or fiscal year.14 The report suggested that this pressure induced employees to postpone losses or push forward sales, in an effort to increase operating earnings. Toshiba’s then-CEO Hisao Tanaka resigned, deeply apologizing for “inappropriate accounting,” which he said was unintentional. He also stated that the issue had created the “largest damage ever” to Toshiba’s corporate image. The committee’s report also singled out other senior executives for blame, saying that they found “systematic involvement” by top management among others, whose goal had been the intentional inflation of the firm’s earnings, along with “a systematic cover-up.” It also noted that Toshiba’s corporate ...