Kobe Steel Scandal: A Corporate Failure

WEIQI WANG

Unprecedented in the history of Kobe Steel, the chief executive of the firm resigned after a data falsification scandal was unearthed. Based on the report released by the firm, some of the staff manipulated data regarding the quality of some of its products before its shipment. The report admits that the company faces issues that have much to do with corporate culture and governance.

Overemphasis on profitability and inadequate corporate governance are reported to be the main causes that prompted staff to create false data. The most unfortunate aspect is that at least two directors knew about the jugglery; however, the profit considerations forced them to overlook such unethical business practices. The people in the know reveal that Kobe has been under severe pressure for quite some time as many Chinese steelmakers have been dumping the steel in the international market with a price advantage.

The working culture at Kobe has made significant changes in the last decade or so. Now, the whole emphasis is on profits and meeting tight delivery schedules to satisfy customers. In this process, the quality aspects of products shipped to customers are often overlooked. While the inter-departmental transfer of personnel has become a rarity, people do not talk with each other frequently. Surprisingly, such things occurred at many places where its manufacturing plants are located. Many called it a systematic failure of the company.

To take a corrective action, Kobe Steel has hired an external consultant to look into its corporate culture and suggest remedial measures; this establishes that the company is willing to restore its past glory and practices.