Kobe Steel chief resigns after data fabrication scandal

The chief executive of Kobe Steel has announced his resignation over a data fabrication scandal that has further dented corporate Japan’s once-vaunted reputation for quality.

The exit of Hiroya Kawasaki as head of the country’s third-biggest steelmaker came five months after the company confessed to tampering with data on metals used in aircraft, automobiles and trains across the world.

“I have to admit that we face deeply rooted issues that go beyond our compliance structure to our corporate culture and the mentality of our executives and employees,” Mr Kawasaki said at a news conference following a deep bow of apology. 

“I have come to the conclusion that the best way forward is for the new management to speedily implement a shake-up so that people feel that Kobe Steel has transformed as soon as possible,” he added in announcing his decision to step down. 

The management reshuffle on Tuesday, which also involved the resignation of the head of the company’s aluminium and copper division and executive pay cuts, coincided with the release of an external investigation report into the practice that dates to the 1970s. 

We face deeply rooted issues that go beyond our compliance structure to our corporate culture and the mentality of our executives

Although the data falsification issue has yet to be linked to any reports of safety problems, the scandal prompted more than 500 of the company’s clients in Japan and overseas to verify that their products met internal safety standards.

The admission by Kobe Steel also sparked wider concerns about the reliability of inspection and quality controls of Japan Inc with other big manufacturers — including Nissan Motor, Subaru, Toray Industries and Mitsubishi Materials — revealing that they have either been cheating on quality tests or falsifying documents to sell products of a lower quality than stated.

In an 80-page report, the company blamed the data fabrication across more than 10 of its domestic facilities on a closed corporate culture, over-pursuit of profits and a reduced awareness of quality compliance due to an “imbalanced operation of plants”. The results mirrored the findings of an internal investigation that were published in November.

A three-member external panel also found that the misconduct was widespread and extended beyond its aluminium and copper division, saying two former executives were directly involved in the data falsification. Two other executive officers, who worked at plants where the data tampering occurred, also failed to report the practice to their bosses despite being aware of the issues. 

The report pointed to a “closed corporate climate where employees on the ground could not speak up about ‘the problems occurring at their plants’ or felt that it wouldn’t make a difference even if they did speak up”.

As a remedy, Kobe Steel said it would ensure that at least one-third of its board members were independent and outside directors. 

Mr Kawasaki will step down from his chief executive role in April but will remain as a board director until he hands over his responsibilities to a successor, who will be chosen at a later date.