Corporate Advisory

Toshiba – Someone Else’s Problem or Lessons for All?

The false accounting issues now emerging from Toshiba are being attributed by some commentators to some very specific Toshiba factors: intense competition in some of the giant’s core markets, pressure to produce strong results from new products to mitigate the impact of the Fukushima nuclear incident, and a Japanese culture of loyalty, obedience and protecting the group.

This analysis misses the mark.  Profit overstatements are certainly not unique to Japan – reflect on Tesco’s recent woes.  In fact, those “very specific” Toshiba factors are anything but.

How many global businesses regularly or constantly experience pressure to enhance profits because of intense competition in core markets?  Or pressure for new products and markets to be seen as successful in the face of challenges or losses in traditional markets?  In my experience these are pretty routine pressures in global businesses.  And there are no businesses I know of where leaders or business units are not under intense pressure to meet challenging performance targets.

And the simple truth is in some cases these pressures will result in some leaders doing the wrong thing.  Thoughtful training and leadership profiling and development can help identify and mitigate higher risk situations.  But like most leadership successes and failures, ethical leadership failures are rarely only about the character of the leader; they are a consequence of a catastrophic coincidence of powerful leadership personality traits with circumstances in which those traits are counterproductive.

The right combination of professional skills and tools can help businesses and leaders understand and self-manage these risks better.  I have worked with clients using some of our best researched holistic methods and they produce valuable and effective results.  But we still cannot totally eliminate the risk of ethical leadership failure.

So how can businesses prevent an ethical leadership failure becoming a corporate catastrophe?  This is where the corporate culture is crucial.  Much immediate commentary has emphasised “Japanese” cultural factors – loyalty, obedience, protecting the group, saving face, and so on.

I have undertaken ethical culture and values research for a number of “Western” businesses with a global footprint.  These have regularly revealed very similar cultural and behavioural latent risks: difficulties raising professional critical challenge, reluctance to “rock the boat”, and strong tribal group loyalties.  I also find other common risk factors including lack of time to question assumptions or to follow through on issues, little or no feedback given or received when decisions are questioned, and fear of reprisal.

It is a mistake to assume Toshiba’s difficulties holds no lessons for all global businesses.  A better response would be a critical examination by business leaders of the actual workplace values and behaviours across their businesses, enhancing the self-awareness of senior management of their ethical derailers, and ensuring that giving and receiving critical professional challenge is routinely practiced and rewarded.