By Mak Yuen Teen
I have been following the recent developments at Toshiba Corporation since last year. In fact, it was one of the companies I asked students in my Corporate Governance and Risk Management course at NUS Business School to write about for their case study project. Obviously, the latest saga had not ended when they submitted the case in April and despite the release of the investigation report and recent changes to the board, including the removal of its chairman, I think this saga still has some legs left.
While some of those at the centre of the saga have left, one also have to ask about the responsibility of those who remain. It is understandable that tossing the entire board in one go (which some investors have apparently called for) may be too disruptive, but it seems to me that the accountability for the debacle of those who remain also needs to be considered. Did they challenge and raise concerns? Did they or could they have done more to change the corporate culture – or did they just defer to that culture and become part of it?
It is well known that Japan has a very hierarchical culture, and that culture permeates into organisations and influence their corporate culture. Appointing foreign individual directors, as Toshiba and some other Japanese companies have done, may be little more than window dressing. It may not change board dynamics and make much difference to the robustness of the oversight.
Five years ago, I edited a case study written by my students about the accounting scandal at Toshiba which blew up in 2015. Corporate culture was a huge contributing factor. Has that changed and will it now change? The case study is attached below for those who are interested.
When we look at the recent corporate governance scandals in Japan involving companies such as Kobe Steel, Nissan, Olympus, Takada, TEPCO and of course Toshiba (all of which are covered in my annual collection of case studies), corporate culture is a recurring theme. Whatever reforms Japan is seeking to make in corporate governance is unlikely to change that.
The same goes for many other markets including Singapore. We have a less hierarchical culture than Japan but we have plenty of “yes men” and a few “yes women” on our boards, and a system that makes effective whistleblowing very challenging due to lack of legal protection and threat of defamation. Our companies and organisations are just as vulnerable to some of the issues we have seen in Japanese companies like Toshiba.
I may write a commentary on corporate governance lessons from the Toshiba scandals over the past few years and there will be another case study on the latest saga in the near future.
