Japan’s Organizational Culture Behind Corporate Scandals: Experts, East Asia News & Top Stories
TOKYO • Japan Inc has been hit by two major corporate governance scandals in as many months, with experts citing the country’s own organizational practices as the source of controversy.
Last month, an investigation by independent lawyers found that tech giant Toshiba had colluded with the Economy, Trade and Industry Ministry to clamp down on the interests of foreign investors, a plan which Prime Minister Yoshihide Suga knew about it.
This month, Mitsubishi Electric uncovered three decades of “organizational misconduct” after discovering that data on inspections of air conditioners and compressors for train use were falsified.
The two scandals caused a stir on the boards of two of the country’s best-known companies.
Still, there is a sense of déjà vu – in 2017, several companies, including Kobe Steel, Nissan, Subaru, Mitsubishi Materials and Toray Industries, admitted to systematic data fraud.
Leading corporate governance lawyer Shin Ushijima told the Straits Times that Japan’s traditional life-long employment and seniority-based hierarchy are the backdrop to the problems.
“These systems provide a strong incentive for executives and employees to defend themselves systematically, which has led to the recent scandals,” he said, adding that if they worked effectively, they would normally be the key to success.
Dr Parissa Haghirian, international management expert at Sophia University in Tokyo, stressed that “not all scandals are rooted in immoral behavior”.
The lack of diversity on corporate boards in Japan adds to the problem, she said.
“Members of corporate boards have been together for decades and know each other like brothers and cousins. It creates a certain power dynamic that leads to a sense of entitlement that they have to get it right.”