Toshiba appoints an 'outsider' as it's new CEO

Professor Emeritus Chris Rowley comments on Toshiba naming an 'outsider' as it's new CEO. He said:

Toshiba, the venerable 143-year old conglomerate, has just appointed an ‘outsider’ as its new CEO. Many commentators are now wondering if this is proof that the corporate culture in Japan is finally changing. Indeed, Prime Minister Shinzō Abe has implemented reforms to improve governance, but more needs to be done. Also, the challenges the new CEO, Nobuaki Kurumatani, faces in trying to re-launch Toshiba are manifold and complex.

The 'outsider'

Kurumatani is an ‘outsider’ by Japanese standards, where it's not unusual for executives within Japanese conglomerates to typically spend decades working their way to the top. Additionally, the new CEO has not come from the electronics sector, but is a life-long banker, with no experience in manufacturing. the last time this occurred was in 1965 when Toshiba named Toshio Doko, an engineer appointed as its chief.

Lack of diversity

However, we cannot say that the Japanese corporate culture is changing because, ultimately, diversity remains lacking.

Kurumatani is Japanese. He is male. He is a graduate of Japan’s elite top university, Tokyo. Also, he has also been on Sharp Corp’s board since June while his Sumitomo Mitsui and Mizuho Financial Group Inc., Toshiba’s main banks, played a key role in negotiating the sale of the chip business, while his network spans business, politics, and policymakers. One could argue that he is the epitome of the typical Japanese executive.

If PM Abe really wants to reform corporate governance, then truly independent (with no links to the business or its customers or suppliers or government officials) directors need to be foisted on companies. It will be very interesting to see what actually happens in practice given the continuing traditional organisational culture and governance regime prevalent and embedded in corporate Japan.

A challenging future

The multiple, difficult challenges the new CEO faces include reviving Toshiba’s reputation for technological innovation and good corporate governance, given the PR disaster of the earlier accountancy scandal driven by excessive profit demands.

This needs to be done at the same time as repairing the balance sheet, re-evaluating Toshiba’s business portfolio, overseeing the sale of its prized flash memory chip unit and managing the risk of possible de-listing from the Tokyo Stock Exchange in the context an earlier report that stated: ‘Within Toshiba, there was a corporate culture in which one could not go against the wishes of superiors’.