Better boards

And it’s not just dodgy data. Conglomerate Toshiba Corp is still battling an accounting scandal, and there is a litany of wrongdoing at Tokyo Electric Power Co (TEPCO), the operator of the stricken Fukushima Daiichi nuclear complex. Just this week, Japan’s nuclear regulator said Japan Nuclear Fuel had violated safety rules at its Rokkasho site by fabricating records to say safety checks had been carried out. The plant’s start data has been delayed 23 times. Even when moves are taken to strengthen external monitoring of companies, “it’s not possible to conduct checks day in, day out,” said Osada at Bunkyo University, who sat on an external panel that audited Toyota during its 2010 recall crisis.

Companies must do more to develop a culture in which workers are able to raise concerns and say ‘no’ to their bosses, and in which teamwork is used to catch wrongdoing by other employees, Osada added. More attention should be focused on Japan’s board members, who are not active enough in engaging with scandals when they occur, says Shin Ushijima, lawyer and president of the Japan Corporate Governance Network, noting a tendency for companies to be over-reliant on appointing outside panels that are not truly independent. Corporate governance reforms are having some impact, says Ushijima.

At Toshiba, he said, “the board, while not perfect, was improved after it was reshuffled.”