Toshiba: a troubling 2 years | 103

Summary

Podcast Summary: Down to Business English – "Toshiba: A Troubling 2 Years" (Episode 103)

Host: Skip Montreux
Release Date: February 6, 2017
Theme:
An in-depth look at how the Japanese electronics giant Toshiba weathered two major crises within just over two years—a massive accounting scandal followed by investment losses—and the impact on its business, employees, and investors.

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Episode Overview

Skip Montreux presents a solo episode—without his regular co-hosts—focusing on the tremendous setbacks suffered by Toshiba between 2015 and 2017. The episode explores the company's fall from grace, beginning with an accounting scandal and culminating in catastrophic investment losses, while reflecting on the profound consequences for the corporation and its stakeholders.

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Key Discussion Points & Insights

1. Toshiba: Historical Background

• Context: Toshiba, founded in 1938 from the merger of two 19th-century companies, is among Japan’s most prominent corporations, ranking #169 on Fortune’s 2016 Global 500.
• “In terms of famous Japanese companies, their name is up there with Sony, Panasonic, Hitachi and Toyota.” (02:01)
• Operations include home electronics, PCs, TVs, medical equipment, flash memory, and nuclear energy.
• Nearly 190,000 employees worldwide.

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2. The 2015 Accounting Scandal

[03:14 – 07:19]

a) Discovery & Details

• In May 2015, a whistleblower tipped off the Securities and Exchange Surveillance Commission (SESC) about illegal accounting at Toshiba.
• Employees had understated project costs in reports to inflate operating profits, misleading stakeholders about the company’s health.
• “In total, it was determined that Toshiba was stating they were $1.2 billion healthier than in actuality.” (05:04)

b) Culture & Causes

• Faulty accounting practices stemmed from upper management pressure to downplay losses, tracing back to pressures following the 2008 financial crisis and the 2011 Fukushima disaster (where Toshiba was closely involved).

c) Fallout & Consequences

• The SESC’s probe revealed deep complicity within senior management.
• CEO Hisao Tanaka and eight board members, including two former CEOs, resigned in July 2015.
• Toshiba shares steeply declined; total market value loss exceeded $8 billion, with annual operational losses of ~$4 billion.
• Fined a record 7.3 billion yen (approx. US$60 million) by Japanese authorities in December 2015.
• “Ugly, depressing, and devastating would be only a few of the adjectives that best describe that situation.” (07:30)

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3. Immediate Response: Downsizing and Asset Sales

[07:32 – 08:19]

• Raising capital via share sales was not possible due to decimated investor confidence; thus, Toshiba began selling assets.
• Laid off 7,800 consumer electronics employees in December 2015.
• Sold overseas TV manufacturing to Asian competitors; sold medical equipment division to Canon.
• Downsizing and asset sales continued into 2016 under new permanent CEO Satoshi Tsunakawa.

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4. Signs of Recovery—A False Dawn

[08:19 – 08:41]

• By late 2016, share prices had regained ground to pre-scandal levels.
• “Little by little, it began to look like their downsizing might have started to pay off. Share prices slowly inched up throughout the year...” (08:23)

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5. Fresh Crisis: Westinghouse Investment Write-Down

[08:41 – 09:37]

• In December 2016, Toshiba announced it must write down a costly overvaluation from U.S. subsidiary Westinghouse Electric’s $220 million acquisition of a nuclear power construction company.
• The anticipated write-down rose from under $100 million to as much as $6 billion, with the final figure pending.
• “Needless to say, when that news broke, the markets went wild. Share prices plunged double digits. And once again Toshiba has started looking at what assets it can sell off to raise capital.” (09:24)
• Considering selling their lucrative memory chip business and possibly exiting the nuclear energy sector entirely.

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6. Investor Backlash and Legal Action

[09:39 – 10:04]

• On January 30, 2017, Mitsubishi Trust Bank filed a suit against Toshiba for 1 billion yen in damages, further threatening recovery prospects.
• “If Mitsubishi wins, it will be even harder for Toshiba to recover from the tailspin they are in.” (10:01)

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7. Human Impact

• Beyond financial numbers, real individuals—employees and investors (many of whom are elderly)—suffered substantial losses.
• “It’s easy to forget that these losses have had and are having a real impact on real people…many of them senior citizens who have their life savings tied up in the stock market and depend on healthy returns to support themselves financially. Nobody wins in a situation like this.” (10:11)

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Notable Quotes & Memorable Moments

• “How can such an old, well established, wealthy company get into so much trouble?” (03:01)
• “Investor reaction to the SEC’s findings was swift, and Toshiba’s share price went into a steady decline throughout 2015.” (06:23)
• “Their company reputation was in tatters. I mean, what investor in their right mind would put money into a company that had been caught lying about how much they were worth?” (07:42)
• “How the mighty have fallen and they are leaving behind a lot of casualties.” (09:34)

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Important Timestamps

| Timestamp | Segment/Topic | |-----------|--------------------------------------------------------| | 00:14 | Introduction, solo episode context | | 02:01 | Toshiba's global standing and history | | 03:14 | Start of the accounting scandal explanation | | 05:04 | Details on the financial overstatement | | 06:23 | Market and managerial fallout | | 07:42 | Start of asset sales and layoffs | | 08:23 | Signs of recovery in late 2016 | | 08:41 | Announcement of new investment crisis | | 09:24 | Impact of write-down announcement on market | | 10:04 | Investor lawsuit from Mitsubishi | | 10:11 | Reflection on real-world human impact |

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Language & Tone

• Skip maintains an accessible, educational tone, blending business analysis with language learning insights.
• He integrates idiomatic expressions and vocabulary explanations, often making the business content relevant to learners of English.

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Takeaways

• Even the most established, diversified corporations are vulnerable to failure if corporate culture becomes toxic and accountability is lacking.
• Scandals and mismanagement can quickly erode decades of trust and value, with devastating consequences for employees, shareholders, and Japan’s corporate image.
• Recovery from such events is challenging, especially if new crises compound older ones.

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For English learners:
Skip embeds several useful business idioms into the episode ("bear with me," "come clean," "go south," "whistleblower," "in tatters"), each explained with practical examples.

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Summary usefulness:
This episode offers a concise yet comprehensive narrative about Toshiba’s downfall, layered with human consequences and valuable business vocabulary—making it an excellent resource both for business news and English language development.

Transcript

[A]

From Tokyo, Japan and Auckland, New Zealand, this is Down To Business English with your hosts, Git Montreau and Samantha Vega.

[B]

Hello everyone. Skip Montreux here all by my little lonesome. Unfortunately, neither of my dear co hosts are able to join me today. For some reason, New Zealand's Internet is suddenly preventing me from speaking with Samantha Vega on Skype and Des Morgan is out with the flu. So you will have to bear with me as I will be reporting to you on my own today. I hope you don't mind. Since it is just you and I. Let me get the ball rolling by asking a few questions. What does a company do when they have been caught in a huge scandal or realize they have made a bad investment that is going to cost the company a lot of money? Should they try to hide it from their investors or should they immediately come clean and let the markets react accordingly? Who should be fired first? The executives and senior managers who led the company down the wrong path or the lowly expendable worker who had no input in making the bad decisions made by the company? Today on down to Business English, I want to take a close look at a Japanese company that has had to struggle with these questions. What company am I talking about? This is the story of the electronics giant Toshiba, who has gone through two damaging crises in a little over two years. So let's do it. Let's get D2B down to business with Toshiba a troubling two years. I am fairly confident that all of you have heard of Toshiba. In terms of famous Japanese companies, their name is up there with Sony, Panasonic, Hitachi and Toyota. They are one of the largest companies in the world after all. As a matter of fact, they ranked number 169 on Fortune magazine's top 500 companies list for 2016 with a reported $52 billion in revenue and $48 billion in assets. First, a little background. Toshiba was created way back in 1938 when two older companies dating back to the 1880s merged. The newly formed company's name was Tokyo Shiba Uda Electric, but was changed to Toshiba in 1978. Over their history, especially in the post war growth period in Japan, they expanded into many industries and today have operations in everything from home electronics to personal computers to televisions, medical equipment, flash memory and even nuclear energy production. Currently, they employ just under 190,000 people worldwide. I know it all sounds pretty impressive. You must be asking yourself, how can such an old, well established, wealthy company get into so Much trouble. Well, things started going south for Toshiba in early 2015. In May of that year, a whistleblower came forward and tipped off Japanese financial regulators, the sesc, otherwise known as the securities Exchange Surveillance Commission, about illegal accounting procedures that had been going on in the company since 2009. Specifically, Toshiba employees had been understating the cost of projects in their financial reports so that the company's operating profits looked a lot better than they actually were. In total, it was determined that Toshiba was stating they were $1.2 billion healthier than in actuality. As the SESC probe deepened, it became clear to investigators that the questionable accounting procedures were well known inside the company and probably had even been ordered by senior executives. They also found evidence that this had been going on since at least 2008, during the global financial meltdown, but could have started even earlier, maybe 2005. What was the reason for the questionable accounting? A corporate culture from the top that pressured employees to falsify losses stemming from the 2008 financial crisis and 2011 Fukushima nuclear disaster, which Toshiba was deeply involved in. Needless to say, investor reaction to the SEC's findings was swift, and Toshiba's share price went into a steady decline throughout 2015. In July of that year, CEO Hisao Tanaka resigned, along with eight other board members, among them two former Toshiba CEOs. In total, the company lost over $8 billion in market value that fiscal year, and the company had operating losses of something like $4 billion, huge. Between April 2015, when the scandal broke, and the company's annual stockholders meeting in September, Toshiba share prices fell dramatically. And then, in December, the company was fined a record 7.3 billion yen, or US$60 million, by the Japanese government. Ugly, depressing, and devastating would be only a few of the adjectives that best describe that situation. Yes, Toshiba was in dire straits, and they had very little choice but to come up with some cash. They couldn't raise capital by selling shares because their company reputation was in tatters. I mean, what investor in their right mind would put money into a company that had been caught lying about how much they were worth? No, the only option they had was to start selling assets. And that is precisely what the interim CEO, Masashi Munemachi, did. Starting in December 2015, Toshiba laid off 7,800 consumer electronic employees. They sold their overseas TV manufacturing operations to Asian competitors and their medical equipment business to one of their main Japanese rivals, Canon. This liquidation trend continued Even after a permanent CEO was put in place in May of 2016, Satoshi Tsunakawa took over the reins of Toshiba, and little by little, it began to look like their downsizing might have started to pay off. Share prices slowly inched up throughout the year and by mid December 2016 they were back to levels similar to where they were when the financial scandal first broke. But they were not out of the woods, not by a long shot. Late last year, Toshiba delivered more devastating news to investors. On December 27th they announced that they needed to write down the value of an investment that had been made by their US Subsidiary, Westinghouse Electric. Earlier in the year, Westinghouse had purchased a nuclear power construction company for $220 million. But eventually they realized that the purchase was overvalued. Initially it was thought the write down would be under $100 million. But by late last month it was expected that it could reach as much as $6 billion. The actual amount of the writedown will be announced sometime in mid February. Needless to say, when that news broke, the markets went wild. Share prices plunged double digits. And once again Toshiba has started looking at what assets it can sell off to raise capital. Currently they are in negotiations to dump their memory chip business and pull out of the entire nuclear energy business. How the mighty have fallen and they are leaving behind a lot of casualties. But it seems like investors have had enough. On January 30th of this year, Mitsubishi Trust bank announced that they will sue Toshiba for a billion yen. That's 1 billion yen in damages. If Mitsubishi wins, it will be even harder for Toshiba to recover from the tailspin they are in. And that is where things stand today with Toshiba. It really is an incredible story involving vast amounts of money. It is easy to forget that these losses have had and are having a real impact on real people. Not just the employees who have lost their jobs, but also the investors, many of them senior citizens who have their life savings tied up in the stock market and depend on healthy returns to support themselves financially. Nobody wins in a situation like this. And on that somewhat depressing note, it is time for me to get D2V down to vocabulary.

[A]

Down to Business English audio scripts are a great learning tool. Be sure to visit the D2B website and download your free audio script of today's podcast, DowntoBusinessEnglish.com that's www.downtobusinessenglish.com.

[B]

The first word, or actually it is a verb phrase that I want to look at today is is to bear with someone. When you use this expression, you are communicating that you would like the listener to be patient with you because they might not like what you are about to say or do. At the beginning of my report, after announcing that I would be reporting alone, I asked you, the listener, to bear with me. In other words, I was asking you, the listener, to be patient with me because I know that you are used to hearing either Samantha or Dez's wonderful voices and you weren't used to listening to only my monotonous voice. In a business situation, when I am in a meeting and have a lot of boring but important information to report to my colleagues, I might begin my presentation by saying, everyone, please bear with me. I have several points to go through and it is important that you listen carefully. Next, I have the idiomatic expression to come clean. To come clean means you tell or admit to the truth. You use it especially after you have been hiding information from people and then decide to tell them the truth. In the introduction of the story, I asked what a company should do if they have bad news to tell their investors. Should they hide the information or should they come clean? In other words, should they tell their investors the truth? For example, if you suspect your co worker of stealing your snacks from the company lunchroom, you might say to him or her, hey, I think you should come clean and admit that you have been stealing my snacks. Moving on, I now want to talk about the very, very useful idiom to go south. When you say something went or has gone south, you are saying that it failed or has started to fail. In the story, I reported that things started to go south for Toshiba in May of 2015. In other words, the companies started to fail. At that time one year ago, it was hard to imagine Hillary Clinton losing the US Presidential election. But looking back now, I think it all started to go south for her when WikiLeaks started releasing private emails from her staff. The content of those emails really made her look bad to American voters. Even after she came clean, many people didn't trust her. Oh dear, I can't seem to get through even one episode without bringing up American politics. I hope you can bear with me. The next D2V word is the compound noun whistleblower. A whistleblower is a person who exposes confidential information to the public that he or she thinks is important for everyone to know. Imagine a lifeguard at the beach who sees a shark swimming a few meters from the shore. Immediately they start blowing their whistle to warn everyone of the danger. That is what a whistleblower does. They warn everyone when there is a danger. In the story I mentioned that Toshiba's financial scandal started when a whistleblower told the Japanese SESC that something bad was happening inside the company. In other words, someone warned the SECs about the danger going on inside Toshiba. I should point out that you can use this expression as a verb as well. Listen to this example. After watching Larry take photocopy paper home from the office every day for a month, Jack blew the whistle on him, Jack told their manager and Larry received an official reprimand. Finally today I have the noun tatters. Tatters are clothes that are old, dirty and torn or ripped. But this word is often used idiomatically to communicate that something is very damaged or is in bad condition. And that is how I used it. In the story I mentioned that Toshiba's company reputation was in tatters. In other words, their reputation was very badly damaged. When I spoke to DEZ on Skype earlier today, he was in tatters. The poor guy had a fever of 38.9 degrees. His voice was almost gone and he told me he was very dizzy. He still wanted to record, but I told him to get some rest. DEZ Morgan he is such a trouper.

[A]

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[B]

Well, thank you very much for bearing with me today. Even though it would have been nice to have Samantha or DEZ with me, I have enjoyed bringing you this report on my own. I hope you all found it interesting. I would love to hear any comments you may have on today's topic or any of the topics we have covered in the past. Just send me an email to downto businessenglishmail.com we read them all and we respond when we can. And don't forget about becoming a D2B member. If you find down to Business English useful in your English studies, or if you get value from the show in any way, visit our website and check out our very affordable membership plans for as little as $5.50 a month. Members get access to the entire library of audio scripts and can sign up for our audio Script Delivery service. Imagine that. 102 audio scripts and free delivery for future episodes your membership will one Help Samantha, Des, and I report on more topics on a regular basis and 2 prevent down to Business English from disappearing from the Internets to keep episodes rolling out. We really need your support. Thanks again for listening. Please take care and I will see you next time. Bye Bye.

[A]

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