ArrowArtboardCreated with Sketch.Title ChevronCrossEye IconIcon FacebookIcon LinkedinShapeCreated with Sketch.Icon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Japan-Update

Kobe Steel to push governance reform under new chief

The scandal-hit Japanese company seeks to change corporate culture

TOKYO -- Kobe Steel, reeling from a damaging data-doctoring scandal, will take steps to prevent a recurrence and strengthen corporate governance under its new president.

Mitsugu Yamaguchi, currently executive vice president, will lead the steelmaker after Chairman and President Hiroya Kawasaki steps down April 1.

The falsification of quality data on aluminum and copper products that came to light in October "resulted from a complex interplay of factors including an unbalanced earnings structure and diminished consciousness of quality," Yamaguchi told reporters at a news conference Friday.

Yamaguchi will become the company's first president to hail from its machinery business, a noncore segment. This quality was essential for Kobe Steel in its efforts to rebuild trust in the company.

"I have experience working in steel, machinery and the head office, and so can look at each operation objectively," Yamaguchi said.

Yamaguchi will be tasked with overhauling Kobe Steel's corporate culture, which was seen as a breeding ground for the data tampering. Though past Kobe Steel scandals, such as that stemming from falsified blast furnace emissions data in the 2000s, led to the resignation of presidents, little has been done to address the root causes of such wrongdoing. The company as a whole "was not particularly inclined to dig deeply" into such matters, Yamaguchi said.

Mitsugu Yamaguchi becomes president of Kobe Steel on April 1.

Financial factors also lay behind the latest scandal, as an earnings decline linked to a weak economy made profitability Kobe Steel's top priority. Even as business has rebounded amid rising steel prices, the company remains hampered by a structure inherently less profitable than those of its competitors. Seeking to address this issue, Kobe Steel consolidated its upstream steel operations at facilities in the Hyogo Prefecture city of Kakogawa last fall.

On the governance side, the company is doing away with the position of chairman, instead selecting one of its outside directors to lead board meetings in the hope of encouraging an unbiased perspective.

Kawasaki and these outsiders will help select a new board of directors to carry out reforms detailed in a report on the data-doctoring scandal, such as steps to improve dialogue between workers and management.

Yet other challenges remain, as none of Kobe Steel's operations is competitive enough to lead its field. Kobe Steel has stayed outside the industry realignment, but the shakeup has made rivals such as Nippon Steel & Sumitomo Metal and aluminum group UACJ bigger and stronger.

Kobe Steel is a player in multiple industries, and so "it is hard to envision" the whole company being involved in realignment or mergers, according to Yamaguchi. But the company will consider partnerships and mergers and acquisitions on a segment to segment basis, he said.

Get unique insights on Asia, the most dynamic market in the world.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media