Osaka – Kansai Electric Power Co. (Kepco) met a flurry of criticism from its shareholders Thursday over a high-profile gift scandal, as it tried to win their support for measures to strengthen its governance system.
At a general meeting held in the city of Osaka, shareholders of the power utility, which serves the Kansai region, condemned the company for the lax corporate culture that led to its failure to prevent the scandal.
“I deeply apologize for causing trouble and worries,” said Kepco President Takashi Morimoto at the start of the meeting.
But shareholders were unmoved. “The nuclear power business took priority over legal compliance, and nobody felt guilty about” the irregularities, said one. Another sought the dismissal of Morimoto, who is among those targeted in a shareholder derivative suit over the affair.
In the so-called gift scandal, scores of Kepco officials received money and goods from a former deputy mayor of the town of Takahama, Fukui Prefecture, which hosts one of the firm’s nuclear power plants.
Earlier this month, Kepco sued former Chairman Makoto Yagi and four other former executives for damages over their alleged failure to handle the issue appropriately.
Since current executives, including Morimoto, are not subject to the litigation, some shareholders filed a class-action suit against the incumbent president as well as 21 other current and former executives.
The scandal could have been prevented if Kepco had disclosed its management information in a fair manner, said lawyer Hiroyuki Kawai, who represented the Osaka Municipal Government at the general meeting. The municipal government is Kepco’s top shareholder.
Kawai said Morimoto was also responsible for the wrongdoing, as he was at the center of management together with the former executives involved in the scandal.
Meanwhile, shareholders approved all the proposals made by Kepco, including the appointments of eight external members — such as Sadayuki Sakakibara, former head of the Japan Business Federation (Keidanren), the country’s biggest business lobby — among 13 board directors and the power supplier’s shift to a “company with committees” management system to improve transparency.
The shareholders meeting lasted over three hours, which was longer than had initially been planned by the company.
Kepco also said Thursday that it would review executive pay levels in response to a series of scandals. Pay will be cut by about 10 percent for the company president and about 6 percent for executive vice presidents.
“We got off to a good start toward building an effective corporate governance system,” Morimoto told a news conference after the shareholders meeting.
Under the company with committees system, Kepco aims to strengthen management oversight by external board members.
But whether the system will function properly remains to be seen, pundits said.
In 2015, Kepco decided to compensate retired executives for part of past pay reductions carried out for poor earnings results. The decision was made only by its then president and then chairman, and the compensation plan was not referred to an advisory committee comprising outside board members.
“Even if a governance system is reformed, that would have no meaning unless a company constructs a corporate culture with high ethical standards,” said Shinji Hatta, professor emeritus at Aoyama Gakuin University, who is an auditing expert.