Takata's crisis moves highlight Japan Inc's need for change

DISAPPEARING ACT: Five deaths and 139 injuries have already been attributed to Takata's products, yet the firm's chairman remains out of sight.


    Nov 17, 2014

    Takata's crisis moves highlight Japan Inc's need for change

    WHEN things go wrong, what is it with Japanese corporate leaders? 

    Shigehisa Takada, chairman of Tokyo-based Takata Corp, 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 United States Senate is holding hearings on the issue this week, and a US grand jury has subpoenaed company officials.

    Yet Mr Takada remains out of sight, leaving company flacks to assure reporters that he "deeply apologises" for the five deaths and 139 injuries now attributed to Takata products. 

    Mr Takada's disappearing act is a reminder of the uphill slog Japanese 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 US$1.7 billion (S$2.2 billion) 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 public-safety 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.

    Mr 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 onto boards (China, India and South Korea already do), 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 Mr Abe's sliding support rate - and intense lobbying by business groups - these much-needed reforms are being watered down.

    If they care about their global reputations, Japanese companies should instead be embracing Mr 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 that executives would wait around for the government to codify rules of conduct and accountability. But that's not anywhere near good enough if they want to compete globally.

    Toyota's 2010 playbook may offer a roadmap for others. Back then, Akio Toyoda had a pretty terrible showing early into the carmaker's crisis over cars that accelerated unexpectedly. Mr Toyoda, the grandson of the company's founder, held just one press conference as the crisis spread. But then, Mr Toyoda was ambushed by TV network NHK in Davos and apologised in a brief interview. He came clean.

    There's no perfect way to respond to a scandal. But if Mr 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.