Kobe Steel falsification reflects the opportunity of investors after the Japanese enterprise management crisis fell to the bottom?

Japan’s Kyodo News reported on Tuesday that the Japanese transportation department is inspecting the factory of Kobe Steel Works (5406.T), which is deeply involved in product data fraud scandals. The transportation department began inspections on Monday at the Kobe Steel Daan Plant (Daian) in Mie Prefecture, west of Tokyo.

According to Kyodo News, the plant produces aluminum used in passenger aircraft developed by Mitsubishi Heavy Industries (7011.T). Mitsubishi Heavy Industries said there is no need to worry about the safety of aluminum parts supplied by Japan's third largest steel mill.

Sunday's parliamentary elections provide an important thing for voters and foreign investors: growth and market stability.

Abe’s ruling coalition won control of the House of Representatives for a four-year term. After Abe was elected, the Japanese stock market was at a 20-year high.

But behind the economic curtains is a series of corporate scandals. Kobe Steel, Japan's third-largest steel company, announced last week that the company had forged counterfeit quality control data on its products, which caused a big impact in the global supply chain. From Hitachi to Toyota, Boeing and even nuclear power plants, as well as steel, aluminum and copper products used in Japan's iconic Shinkansen trains may be affected, and the number of companies affected has doubled to around 500.

According to the Nikkei, anonymous sources said that these forgeries were apparently carried out with the knowledge management manager's knowledge and continued for decades. Kobe Steel acknowledged that this data fraud has occurred for at least 10 years. Although the impact is unclear, some regulators are warning: The European Aviation Safety Agency recommends suspending the purchase of Kobe steel products before the Japanese authorities investigate. The US Department of Justice is asking the U.S. department of Kobe Steel to provide relevant documents for the sale of products to US companies.

Kobe Steel said on Friday that one of its copper factories was investigated for violating Japanese industry standards. Kobe Steel's share price fell 1.59% in Tokyo at 868 yen. Since the scandal broke out, the stock has fallen 36%.

But the scandal coincides with Japanese Prime Minister Shinzo Abe’s bid for a seat on Sunday’s election, prompting Japanese companies to stick to new corporate governance rules to attract foreign investors. The fact that Abe worked in Kobe Steel before entering political career showed a close connection between industry and government, which may make reform more difficult.

The purpose of enterprise management reform is to establish “transparent and timely decision-making” for the company, and encourage institutional investors to promote management to increase returns and reduce cross-shareholding.

a long list of fraud

Kobe Steel is just the latest in a series of corporate scandals that have damaged the reputation of Japanese brands known for their quality and craftsmanship. Nissan’s suspension of production of domestic vehicles has led to the recall of 1.2 million vehicles due to the recent disclosure of unauthorized inspectors; the public broadcaster NHK reported that this practice has been going on for at least 20 years.

Automaker Takada announced earlier this year that it had declared bankruptcy after the biggest recall in the history of the car, including millions of cars recalled by Toyota and 17 people killed in airbag accidents around the world. In December 2015, Toshiba, an electronics and nuclear power equipment manufacturer, was subject to regulatory fines, with a net profit of $1.3 billion over a three-year period. Investors have filed more than 30 lawsuits with a total loss of $1.2 billion. Other Japanese brands have been eclipsed in recognition of counterfeit data in recent years, including Mitsubishi Motors, Asahi Kasei Building Materials and Toyo Rubber Industry.

“The power and obedience culture still permeates the governance of Japanese industry. Unfortunately, this has made it difficult for top management to act responsibly, and other managers have not been questioned by subordinates.” Thomas, head of the Australian Corporate Governance Center at the Australian Polytechnic University · Clark Clarke said, “Responsibility and openness must be part of contemporary Japanese industrial culture.”

But the change is hard. With the leaking of Japan’s largest company in 2011, Michael Woodford, the first foreign chief executive of optical equipment manufacturer Olympus, disclosed $1.7 billion in forged financial statements, which observers hope The situation can be improved. Woodford, who was fired, told Reuters last year that 80% of senior business leaders in Japan thought he was a traitor to the company.

company culture

External ideas and outside directors, the company has proposed as a way to reduce misconduct. Gerhard Fasol, CEO of Tokyo's mergers and acquisitions consulting firm Eurotechnology Japan, is a member of the board of directors and the audit committee of the board of supervisors of Japanese publicly traded companies. He pointed out that the number of foreign independent directors of Japanese companies is still very small.

Fasol said: "These problems, especially in companies with a close corporate culture, the same people work with each other for a long time, without external supervision and external talent."

“Therefore, Japan’s recent corporate governance reforms are very important and must be further strengthened. That is to say, independent directors or external boards need more power and respect, while changing the way companies think.”

He believes that corporate fraud is not a unique cultural issue in Japan, but a management issue.

Investor opportunity

Steven Bleistein, CEO of Tokyo-based management consulting firm Relansa, believes that it is dangerous for investors and foreign companies operating in Japan to rely on culture to explain what happens in the Japanese business world.

"The danger is to assume that Japanese culture itself is protecting or harming your investment." Bleistein said, "For example, Japan's quality advantage is considered to be almost Japanese cultural traits, and the truth is not. The quality of Japanese manufacturing is due to the company's leadership. The company has imposed a company's quality corporate culture and has strict process support."

Among the world's five largest developed economies, Japan currently has the lowest price-earnings ratio. And the popular valuation indicator - Yale University professor Robert Shiller's CAPE ratio - Japan is second only to the United States, the second most popular: its CAPE reading is 27, far lower than 2010, more than 38. The lowest CAPE ratio in Japan in the past eight years is mid-2016 with an index of 24.

“Smart investors tend to evaluate company leadership and processes, rather than assuming that the company represents the quality or risk of a Japanese company.” Bleistein said, “Now many companies in Japan are doing well, but because of Kobe’s scandal So the value is undervalued and smart investors will buy these companies for a long time."

Bleistein and other observers believe that Japan's recent scandal is a sign of increasing transparency because of the low level of tolerance for such malfeasance.

“Japan’s quality and compliance are critical, but in a more transparent corporate environment, companies have learned that these mistakes and misconduct must be cleaned up as early as possible,” said Martin Schulz, senior research fellow at the Fujitsu Institute in Tokyo. Previously internal issues are now becoming public and need to be managed with more partners, and it seems that more companies can follow up on governance improvements."

Battery operated electric toothbrush

Battery Operated Electric Toothbrush,Travel Toothbrush,Bristle Toothbrush,Battery Toothbrush

GUANGZHOU WANYUAN INDUSTRIAL CO.,LTD. , https://www.wanyuanfuture.com