Business / Corporate

Kobe Steel's new CEO vows to restore damaged trust with program of reforms

by Kazuaki Nagata

Staff Writer

The newly appointed president and chief executive officer of Kobe Steel Ltd. vowed Friday to restore damaged trust caused by a data-falsification scandal at the firm, saying it is essential to rebuild corporate governance and culture.

“Carrying out a drastic reform on governance and corporate culture is my duty and a critical process for our company to regain trust. I am taking this very seriously,” said Mitsugu Yamaguchi, currently an executive vice president at Japan’s third-largest steel-maker, who will assume his new position on April 1.

An investigation conducted by a third party on the scandal, disclosed earlier this month, said employees had engaged in misconduct on a series of occasions due to weak corporate governance and pressure from headquarters over profitability. This has led to “a culture that prioritized winning purchase orders and meeting delivery deadlines over ensuring quality,” the report said.

It added that the Kobe Steel group had been plagued with sectionalism and a closed corporate culture in which personnel transfers and communications with different sections hardly ever took place. The environment had facilitated continuous wrongdoing dating back to the 1970s.

The steel-maker said 605 firms, including Toyota Motor Corp. and JR Tokai, were found to have been affected by the scandal. It is conducting safety inspections with the affected companies.

Kobe Steel is looking into restructuring its core and group firms while increasing its number of independent outside directors, said Yamaguchi, who joined Kobe Steel in 1981 and is currently overseeing the machinery business. “We are aiming to transform ourselves into a company that maintains truly unbending compliance and makes sustainable growth,” said Yamaguchi, adding that thoroughly implementing measures to prevent any recurrence is also his responsibility. For example, the firm plans to use more automated systems to record inspection data to prevent employees from manipulating it. It will also strengthen quality management by forming a special team that will tackle related issues.

Kobe Steel admitted malpractice at the firm last October, saying that between September 2016 and August 2017 it had shipped aluminum and copper products that did not meet specifications agreed with customers.

Since then more incidents of misconduct have come to light, including falsifying quality inspection data to meet client specifications when actually it did not.

The firm also said its employees had attempted to cover up these practices during an internal investigation.

Hiroya Kawasaki, current president and CEO, announced earlier this month that he will step down from the helm to speed up reforms under new management.

Yamaguchi expressed concern about U.S. President Donald Trump’s plan to implement tariffs on steel and aluminum imports, saying they could affect the firm’s clients in the United States. Yamaguchi added that it is still unclear how the possible tariffs would impact company’s earnings.

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