Resignation of Kobe Steel bigwigs not end of data fabrication scandal

The Yomiuri ShimbunThe established practice of tolerating this wrongdoing had swept through the entire company — that is the only way to describe what happened. Kobe Steel Ltd.’s new leadership lineup will bear the heavy responsibility of overhauling the company’s corporate culture.

Kobe Steel has released a final report about its falsification of product inspection data.

The report revealed that an additional 163 companies were shipped products that did not match specifications Kobe Steel had promised. Combined with the companies announced in October as being affected by the data scandal, the number now tops 600.

Aluminum, copper, steel and other products whose data had been falsified have been used widely by industries, including automobiles and trains, in which human lives are at stake. Furthermore, products shipped to nearly 40 companies have not yet been confirmed as safe.

Verifying the safety of these affected products needs to be completed swiftly.

Kobe Steel has decided Chairman and President Hiroya Kawasaki and Executive Vice President Akira Kaneko will resign to take responsibility for the data manipulation. However, the company must not allow this to bring the curtain down on the scandal.

According to the report, the misconduct had continued since the 1970s. The report found data was fudged at six more Kobe Steel facilities, meaning that 23 facilities in total were involved.

A former executive who rose to be vice president was directly involved in the data falsification. Current executive officers were aware of the misconduct but allowed it to continue without taking steps to correct it. More than 40 regular employees also played a role.

Some facilities used computers to openly manage the altered numerical data for products and the client list that received these materials. This must be evidence the malfeasance had become routine practice. There is a deep-rooted predisposition to treat product quality lightly.

Internal reforms needed

A corporate culture in which the overriding imperative was to win orders and meet delivery deadlines had become ingrained, and the head office could not keep an eye on the entire firm. The report said this was one cause of the wrongdoing going unaddressed.

Kawasaki insisted “there were absolutely no instructions” from the head office to conduct inappropriate actions. Be that as it may, Kobe Steel cannot avoid coming under fire for poor corporate governance.

The company urgently needs to push ahead with internal reforms that will, among other things, allow the voices of front-line workers to reach management.

As steps to prevent a recurrence, Kobe Steel plans to increase the proportion of outside directors on its board to at least one-third to strengthen its checking functions.

But even boosting the ratio of outside directors unfamiliar with the company’s inner workings will not be the decisive factor in the reforms. Whoever is selected as the new president must take the initiative in displaying determination to ensure legal compliance and work hard to boost the quality of the company’s products.

The future course of a U.S. Justice Department investigation into Kobe Steel also is a cause for worry. Other companies such as Takata Corp., whose products caused problems involving faulty airbags, have been forced to pay massive financial penalties.

Materials are used in a diverse range of industries. It is difficult to foresee just how far the impact of this scandal will reach, but this could become a situation that shakes the foundation of the company’s management. There could be a huge price to pay for a short-term pursuit of profits.

This scandal must be used as a lesson on the path toward rebuilding confidence in Japan’s manufacturing prowess.

(From The Yomiuri Shimbun, March 8, 2018)Speech


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