TOKYO: The president of Toshiba and seven other high-level executives and directors resigned on Tuesday over a $1.2 billion accounting scandal blamed on management's overzealous pursuit of profit that has battered one of Japan's best-known firms.
Hisao Tanaka and vice chairman Norio Sasaki - also a former president - stepped down after an independent report found senior management complicit in a years-long scheme to pad profits.
In a stinging indictment, the report by a company-hired panel said managers were involved in 'systematically' inflating profits over several years, in one of the most damaging accounting scandals to hit Japan in recent years.
Read: Irregularities: Toshiba bosses blamed for scandal
"It has been revealed that there has been inappropriate accounting going on for a long time, and we deeply apologise for causing this serious trouble for shareholders and other stakeholders," said a company statement.
"Because of this Hisao Tanaka, our company president, and Norio Sasaki, our company's vice chairman... will resign today."
Read: Accounting Scandal: Toshiba chief likely to resign
Tanaka, 64, and Sasaki, 66, both joined Toshiba in the early Seventies.
Sasaki served as Toshiba president between June 2009 and June 2013, covering most of the period during which the company inflated the profits.
Chairman Masashi Muromachi will take over as president in the interim, the company said.
The embarrassing findings come less than two months after the country adopted a long-awaited corporate governance code that backers hoped would usher in a new era of transparency for shareholders in Japanese firms.
They will also deal another blow to corporate Japan's image after a huge scandal at camera and medical equipment maker Olympus. In 2013, a trio of former executives at the firm were handed suspended jail for their roles in a $1.7 billion accounting fraud.
That story grabbed international headlines as its first foreign executive exposed the cover up that led to his colleagues' downfall.
The Toshiba panel, headed by a former Tokyo prosecutor, painted the picture of a corporate culture where underlings could not challenge powerful bosses who were intent on boosting profits at almost any cost.
"Inappropriate accounting was systematically carried out as a result of management decisions... betraying the trust of many stakeholders," according to a summary of the report released by the firm late Monday.
"Toshiba had a corporate culture in which management decisions could not be challenged," it added.
Despite the storm engulfing the company, Toshiba shares jumped Tuesday as the report ended months of uncertainty about the extent of the accounting problems, and who was to blame.
The Tokyo-listed shares soared 6.13 percent to 399.90 yen by the close.
Analysts said the share price jump was the result of investors buying back into the battered stock, which had lost more than 20 percent since May.
"The numbers are out and investors have no further reasons to sell for the moment, so we are seeing some repurchasing momentum," Mitsushige Akino, executive officer at Ichiyoshi Asset Management, told Bloomberg News.
The scandal risked further fallout, including lawsuits, but was unlikely to bring one of Japan Inc.'s giants to its knees, said SMBC Nikko analyst Yutaka Ban.
"While the profit downgrade isn't a small amount of money, it should not significantly harm the company's credit strength," Ban said.
The findings drew a rebuke from Japan's finance minister Taro Aso who called the affair 'woefully regrettable'.
"This could damage the credibility of the Japanese market," he warned.
In May, Toshiba warned over the ballooning accounting 'irregularities' and yanked its earnings forecast - a 120 billion yen net profit on sales of 6.7 trillion yen - for the past fiscal year.
Toshiba's accounting scandal began when securities regulators uncovered problems as they probed the company's balance sheet earlier this year.
The findings mean Toshiba will have to restate its profits by 151.8 billion yen for the period between April 2008 and March 2014. It is unclear whether it will affect the fiscal year ending March 2015.
"In some cases top management and division leaders appeared to have shared a common objective to inflate profits," the panel said.
"Employees were pressured into inappropriate accounting by postponing loss reports or moving certain costs into later years."
Best known for its televisions and electronics, including the world's first laptop personal computer and DVD player, Toshiba has more than 200,000 employees globally and also operates in power transmission and medical equipment.
Among the divisions affected by the inflated profits are the infrastructure, audio-visual and semiconductor businesses, the panel said.