How Japan's corporate culture allows corrupt CEOs to win

After his arrest, Nissan removed Carlos Ghosn as chairman due to his suspected acts of financial misconduct:...

Posted: Nov 28, 2018 4:12 AM
Updated: Nov 28, 2018 4:12 AM

After his arrest, Nissan removed Carlos Ghosn as chairman due to his suspected acts of financial misconduct: understating his income and misusing the company's assets. But the Nissan scandal is just the latest in a long line of mishaps to rock the Japanese corporate world. Other manufacturers, such as Kobe Steel, Takeda and Toray Industries, have shocked the public in recent years, admitting to violating safety rules or falsifying data.

But the scandals are not only a shock to Japanese consumers — they leave a mark on Japan`s reputation as a reliable and quality-oriented manufacturer and business partner. Japanese corporate structures offer some explanations for the events.

Asia

Continents and regions

East Asia

Japan

Labor and employment

Scandals

Workers and professionals

Business, economy and trade

Company activities and management

Corporate culture

Management theory and practice

Business executives

No specialists

In most Western companies, employees are hired with a detailed work contract, and only do what's agreed on in the contract. In Japan, employees are hired with no job description, and can be assigned any task.

Since there is no work division in most Japanese companies, all employees can be transferred within a day to a new department, or even location. Companies usually have employees change departments every two years. This job rotation allows company members to know the basic job functions in every part of the firm, so by the time they become top managers, they truly know the company inside-out.

However, this often means that many Japanese firms lack specialists since most managers had a short time to learn about particular business processes. And they're often not up to date when it comes to emerging business topics, such as compliance, diversity management or digitization.

Lifetime employment

Japanese companies provide lifetime employment, and they expect employees to stay with them until retirement. In fact, many Japanese are hired by their companies right after graduation and stay in their companies for their entire work lives. But a lifetime in the same company with the same colleagues makes it difficult to raise concerns and question existing processes. Even on company boards, we find mainly Japanese managers know only one company and have spent decades working there. Often, new international standards are recognized very late or not at all.

What's more, new hires are trained in each department by older members, or sempai, who are role models and informal leaders at the same time. This creates a strong bond between employees, but having such close-knit units and strict hierarchies makes it difficult for new ideas to flourish.

Labor laws

Japanese labor law makes it difficult to fire full-time employees. They can stay in the same company until retirement and enjoy full protection by the law as long as they dedicate themselves fully to the firm and rotate throughout the company for the first 10 years of their career.

Many Japanese employees do not question internal processes because they cannot compare to processes in former work places or other companies. The one-company-per-lifetime system creates a strong bond between employee and firm and makes it difficult for employees to question or criticize internal processes, even if they perceive them as wrong or unethical.

What's next?

Now that trust in Japanese companies has been deeply shaken, it's obvious that Japan needs to beef up corporate governance regulations.

The government has already taken some first steps. As of 2015, Japanese boards are supposed to have two external directors. Though the code itself isn't legally binding, companies have to declare why they're not following it, which puts pressure on them to do so. The government hopes diversifying traditional boards will lead to more innovative decision-making amongst board members.

Changes in Japanese society will also have an effect on Japanese companies. Japan is currently facing a very serious labor shortage because of a population decline. The unemployment rate is at a record low of 2.3%, and companies regard recruiting as their biggest future challenge.

The Japanese government has reacted to this population decline by relaxing immigration laws and making it easier for international managers to enter Japanese firms. These international employees may bring more international perspectives, as well as implement new procedures in traditional Japanese firms to make them more competitive on a global scale. In the coming years, they may also influence attitude toward compliance and safety standards.

Furthermore, whistleblowing has become more common in Japan in recent years. Many of the scandals in recent months have resulted in security risks for the Japanese population, so more employees have begun reporting them to authorities.

The Nissan scandal is a wake-up call for Japanese companies to rethink their processes and install effective compliance management processes. We will see what they learn from it.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 15229

Reported Deaths: 723
CountyConfirmedDeaths
Hinds99925
Lauderdale73561
Madison72023
Scott65012
Neshoba63038
Jones59825
Forrest55338
DeSoto5337
Rankin4217
Leake42112
Holmes39728
Copiah3104
Jackson30513
Attala29216
Yazoo2734
Newton2714
Leflore25831
Harrison2577
Lincoln25628
Monroe25525
Lamar2355
Oktibbeha23512
Lowndes2119
Pearl River20931
Pike20211
Adams19615
Noxubee1856
Wayne1771
Warren1719
Washington1687
Covington1652
Bolivar16011
Jasper1574
Smith15011
Lee1496
Kemper14411
Clarke14318
Chickasaw13312
Lafayette1314
Coahoma1214
Carroll11711
Marion1159
Clay1124
Winston1121
Claiborne1112
Lawrence1021
Simpson1010
Yalobusha905
Hancock9011
Tate891
Grenada893
Wilkinson889
Itawamba877
Union835
Marshall833
Montgomery831
Sunflower813
Jefferson Davis772
Tippah7311
Panola703
Webster691
Calhoun644
Humphreys607
Amite601
Walthall550
Tunica543
Prentiss523
Perry503
Choctaw432
Jefferson421
Tishomingo320
Pontotoc323
Stone300
Franklin282
Tallahatchie271
Quitman260
George251
Alcorn171
Benton150
Greene121
Sharkey70
Unassigned00

Alabama Coronavirus Cases

Confirmed Cases: 17359

Reported Deaths: 618
CountyConfirmedDeaths
Mobile2191115
Jefferson1780102
Montgomery163238
Tuscaloosa73814
Marshall6879
Franklin5457
Lee54033
Shelby50319
Tallapoosa42364
Butler40217
Chambers35325
Walker3442
Elmore3398
Madison3274
Baldwin2839
Dallas2603
Morgan2511
Etowah24811
DeKalb2433
Lowndes23812
Coffee2291
Sumter2206
Autauga2164
Houston2094
Bullock2034
Pike1980
Colbert1782
Russell1670
Marengo1636
Lauderdale1612
Hale1598
Calhoun1543
Choctaw1518
Barbour1501
Wilcox1447
Clarke1422
Cullman1260
Randolph1257
Marion12111
St. Clair1181
Pickens1114
Dale1100
Talladega1093
Chilton1001
Limestone940
Greene944
Winston880
Covington771
Jackson772
Crenshaw763
Macon754
Henry742
Bibb721
Washington686
Blount611
Escambia573
Lawrence480
Geneva400
Conecuh391
Coosa381
Monroe372
Perry370
Cherokee373
Clay272
Lamar230
Fayette150
Cleburne141
Unassigned00
Tupelo
Clear
79° wxIcon
Hi: 83° Lo: 59°
Feels Like: 80°
Columbus
Clear
81° wxIcon
Hi: 84° Lo: 59°
Feels Like: 82°
Oxford
Clear
77° wxIcon
Hi: 81° Lo: 57°
Feels Like: 78°
Starkville
Clear
79° wxIcon
Hi: 82° Lo: 55°
Feels Like: 79°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather