High up on any list of the worst companies are these two rogue Japanese outfits: Tepco and Takata.

Thanks to poor safety standards, Tokyo Electric Power Company Holdings Inc.’s reactor is still irradiating Fukushima, just a couple of hundred kilometers from the capital, 5½ years after the Great East Japan Earthquake. Its latest Band-Aid to keep the Tokyo 2020 Olympics on track: a huge ice wall to trap radioactive groundwater that even Tepco isn’t sure will work.

But the scandal de jour — and Exhibit A for why Prime Minister Shinzo Abe’s revival road map has gotten scant traction — concerns deadly air bag maker Takata as it veers toward Chapter 11.

Takata Corp.’s shares are tanking amid reports it’s eyeing bankruptcy protection in the United States and hiring law firm Weil Gotshal & Manges as it triggers history’s biggest auto recall. Word is, Takata is fielding roughly five bids as it counts the costs of at least 16 deaths and more than 100 injuries. Blistering media reports detail how penny-pinching led air bag inflators to rupture and propel shrapnel into vehicle passengers, raising even more questions.

My question is this: Why in the world hasn’t CEO Shigehisa Takada been fired already?

The board should have axed him in November 2013 when, in an act of cowardice, Takada sent an underling to appear in his place at U.S. Senate hearings. Shareholders should have revolted as the Wall Street Journal, New York Times and others uncovered how the company put lives at risks to save a few bucks — it knew about defects for years. All involved should have sounded the alarm over Takada’s head-in-the-sand crisis strategy.

CEO Takada’s response to recalls sure to exceed 100 million vehicles? Teasing us. As far back as January, Takada, 50, began hinting he will resign. Six months later, in June, the same hollow pledge. Here we are, 3½ years after the first big recall, and Takada is still there.

Somehow, the “this-is-Japan” explanation no longer works, not nearly four years into the prime minister’s much-ballyhooed Abenomics revolution. Yes, Takada is the grandson of Takezo Takada, who founded the family colossus in 1933 (“Takata” is a play on the family name, much like the Toyodas using ” Toyota”). That’s the main reason Takada hasn’t been tossed to the curb. But why aren’t shareholders demanding his ouster? Where are regulators? Why isn’t Keidanren, Japan Inc.’s mouthpiece, applying pressure?

It’s been awkward to see Washington regulators pounce on Takata long before Tokyo. It is disappointing, too, that Abe, Finance Minister Tara Aso and watchdogs look the other way amid a scandal tarnishing the Japan brand and making a mockery of the reform zeitgeist.

This, after all, was supposed to be the year of Japan Inc.’s reawakening. Since 2013, the year Takata’s troubles went public, Abe’s team introduced a U.K.-style “stewardship code” to empower asset managers and shareholders to speak out and a new framework championing greater return on investment and more outside directors.

Works in progress, to be sure. But the biggest corporate stories of the last 12 months show how modest policy tweaks are no match for ingrained insularity: Toshiba cooking the books, Sharp fudging liabilities during merger talks, charges filed against Tepco executives five years too late, massive Olympics-costs overruns and Takada still in his office. Tokyo needs to disrupt incestuous ties between CEOs, bureaucrats and elected officials, Japan Inc.’s “iron triangle.”

Abe could do it, if he wanted. The longest-serving prime minister in a decade has broad public support, majorities in both Diet chambers and a reform plan that cheers global investors. He could give corporate-governance upgrades teeth, direct regulators to investigate and punish malfeasance and employ the bully pulpit.

Let’s make clear that unaccountable Takata-like empires, blatant takeover defenses, cross-shareholdings between friendly companies, seniority-based promotions, rigid work schedules and Tepco-life safety shortcuts are holding back the economy. Abe should rein in the powerful nuclear-industrial complex — of which Tepco is a central part — and incentivize a renewable energy boom. Last Wednesday, Tepco’s incompetence (35-year-old underground cables) left 580,000 Tokyo households (train lines and traffic lights, too) without power.

But will he? After 1,387 days, Abenomics is on life support and relying on the same stimulus bursts his Liberal Democratic Party has employed since the 1950s, last week’s ¥4.11 trillion package being the latest. Aggressive monetary expansion hasn’t beaten deflation. Abe’s ambitious structural reform agenda remains on the drawing board, as evidenced by Takata and other icons fighting modernity.

In a more perfect world, Takata might be allowed to fail and prove Japan is embracing some creative destruction. That, however, might put Honda, Toyota, Volkswagen and other giants at risk considering Takata’s pivotal place in supply chains. Even so, top Takata executives should face criminal charges. And its CEO must be fired, no matter who his granddad is. The longer Takada keeps his job, the more investors will roll eyes at claims Japan is “open for business,” as Abe asserts.

William Pesek, executive editor of Barron’s Asia, is based in Tokyo and writes on Asian economics. www.barronsasia.com

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