Kobe Steel’s faulty waiting game

What’s Kobe Steel Ltd. waiting for? Executives at the Japanese metal manufacturer accused of falsifying safety data will decide whether to resign only after an independent investigation wraps up at year-end, according to a Reuters report on
Monday, citing people familiar with the situation.
Come on, now. If you have to ask, you probably
already know the answer.
And if President Hiroya Kawasaki and his chums are going to wait around for months to see whether falsifying the strength and durability of metal used in cars, airplanes and trains around the world will be judged egregious enough to forfeit their jobs, then board members and shareholders should step up and call for resignations. I understand Kawasaki’s temptation to wait. No safety issues have been linked to the data cheating and the case is a far cry from the deaths that resulted from Takata Corp.’s faulty air bags.
More than 80 percent of Kobe Steel clients that received falsified products have been cleared of safety concerns. Regardless of the probe’s outcome, the fact that the quality control cover-up stretched back decades suggests Kobe Steel’s current management have either been dozing off or deliberately disregarding standards they pledged to follow. Neither is a stellar management characteristic.
Kobe Steel shareholders should also be aware of the message they are sending to corporate Japan about what kind of behavior is tolerable.
It’s somewhat symbolic that Kobe Steel was Shinzo Abe’s first job upon returning to Japan from studying politics at the University of Southern California. The prime minister has been advocating corporate governance reform since he first came to office in 2012.
The steady drumbeat of scandals across Japan Inc., from Kobe Steel and concurrent testing falsification allegations at Nissan Motor Co. and Subaru Corp., has led to what Gadfly’s David Fickling called a familiar bout of soul-searching in a country once praised for strict product quality standards. Investors who want to see Japan reclaim its prestige will have to step up and do something about it. When Toshiba Corp. President Hisao Tanaka resigned after investigators discovered the conglomerate’s billions of dollars in inflated earnings, he explained that a renewal among the management ranks was the only way forward.
I’m not sure how much of a choice Tanaka had then, but the same sentiment rings true now for Kobe Steel. Plus, the company’s business could really benefit from a new slate of executives coming in with a mandate to shake things up. The conglomerate model hasn’t been working for the metals manufacturer and current executives nostalgic about the steel business are standing in the way of a company that’s primed for spinoffs and M&A. New blood could also usher in much-needed investor-friendly actions like boosting shareholder returns and putting the company’s cash to work.
Waiting around will only drag out the inevitable. It’s time for Kobe Steel to hit restart.

— Bloomberg