Ja­pan needs to cul­ti­vate a cul­ture of trans­parency

The Star Early Edition - - OPINION & ANALYSIS - Wil­liam Pe­sek

WHEN things go wrong, what is it with Ja­panese cor­po­rate chief­tains? Shige­hisa Takada, the chair­man of Tokyo-based Takata, is fac­ing a spi­ralling scan­dal after news that another vic­tim – a preg­nant woman in Malaysia – was killed by one of his company’s airbags. The US Se­nate is hold­ing hear­ings on the is­sue next week, and a US grand jury has sub­poe­naed company of­fi­cials. And yet Takada re­mains AWOL, leav­ing company hacks to as­sure re­porters that he “deeply apol­o­gises” for the five deaths and 139 in­juries now at­trib­uted to Takata prod­ucts.

Takada’s dis­ap­pear­ing act is re­minder of the up­hill slog Prime Min­is­ter Shinzo Abe faces in his ef­forts to strengthen cor­po­rate gov­er­nance in Ja­pan. Five years after the start of Toy­ota’s mas­sive re­call and three years after Olym­pus shocked the world with a $1.7 bil­lion (R18.8bn) fraud, the coun­try’s top ex­ec­u­tives re­main far too in­su­lated from the kind of share­holder and me­dia scru­tiny now common in the West.

I’m not try­ing to in­dict all of Ja­pan Inc here. But the fact that ex­ec­u­tives at Takata, a company that em­ploys 35 000 peo­ple world­wide, think they can han­dle a public­safety is­sue with such a bla­tant lack of trans­parency should be deeply con­cern­ing to the gov­ern­ment and peo­ple of Ja­pan.

Com­pa­nies make faulty prod­ucts some­times. In­no­va­tion, after all, is about tak­ing risks and see­ing what works. When mis­takes hap­pen, the key is to iden­tify flaws quickly, ad­mit them openly and fix them me­thod­i­cally.

It’s all about the re­sponse, as MBA stu­dents learn about, say, John­son & John­son pulling mil­lions of Ex­tra Strength Tylenol bot­tles from store shelves in the early 1980s after seven Chicago-area deaths.

Abe has pledged to drag Ja­panese man­age­ment into the mod­ern world, kick­ing and scream­ing if need be. He’s push­ing firms to bring in­de­pen­dent direc­tors on to boards, hire more fe­male ex­ec­u­tives and make more company data avail­able. He wants to in­tro­duce a stew­ard­ship code that would en­list in­vestors to press man­age­ment for higher re­turns. But the en­deav­our is a work in progress, at best. Thanks to Abe’s slid­ing support rate th­ese much­needed re­forms are be­ing wa­tered down.

Ja­panese com­pa­nies, if they care about their global reputations, should in­stead be em­brac­ing Abe’s ef­forts and, in­deed, go­ing beyond them. Per­haps Takata’s next chair­man shouldn’t be the grand­son of the company’s founder, but a leader ready for prime time. In a de­cid­edly top-down econ­omy like Ja­pan’s, it’s not sur­pris­ing ex­ec­u­tives would wait around for the gov­ern­ment to cod­ify rules of con­duct and ac­count­abil­ity. But that’s not nearly good enough if they want to com­pete glob­ally.

Toy­ota’s 2010 play­book may of­fer a road map for oth­ers. Back then, Akio Toy­oda had a pretty ter­ri­ble show­ing early into the car maker’s cri­sis over cars that ac­cel­er­ated un­ex­pect­edly. Toy­oda, the grand­son of company’s founder, held just one press con­fer­ence as the cri­sis spread. But then Toy­oda was am­bushed by TV net­work NHK at Davos and he came clean.

“We pur­sued growth over the speed at which we were able to de­velop our peo­ple and our or­gan­i­sa­tion,’’ Toy­oda told U.S. law­mak­ers dur­ing a Capi­tol Hill grilling soon after. “You have my per­sonal com­mit­ment Toy­ota will work un­ceas­ingly to re­store the trust of our cus­tomers.”

If Abe is go­ing to get trac­tion with poli­cies to make cor­po­rate Ja­pan more vi­brant and pro­duc­tive, ex­ec­u­tives have to drop the ig­nore-deny-ob­fus­cate mind­set of old. Nei­ther they nor their cus­tomers can af­ford it. – Bloomberg

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