(Bloomberg) -- Another company has joined a growing list of Japanese firms nabbed for lax corporate governance, as the nation struggles with challenges to its reputation as a trustworthy business destination.
Regional lender Suruga Bank Ltd. admitted on Tuesday that its staff may have known that documents for loans to a troubled property investment scheme had been falsified. Pressure to increase profits may have contributed to the failure of the loan screening, the bank said in a statement. Shares plunged as much as 14 percent.
The words, the familiar images of executives bowing in apology, and the formation of an outside panel of experts to investigate echo a series of scandals that ensnared the likes of Kobe Steel Ltd., Mitsubishi Materials Corp. and Toray Industries Inc., all of whom admitted last year to altering documents amid increasing pressure to boost sales in a declining domestic market.
“Since the 1980’s, many Japanese companies have struggled to deliver growth, had debt and a corporate culture that emphasized subservience,” said Robert Medd, founder of Bucephalus Research Partnership. “In effect, the perfect storm for corporate malfeasance.”
A 2017 survey by the Japan Association for Chief Financial Officers found that nearly three out of four CFOs had seen or heard about “inappropriate” actions such as fraudulent accounting or embezzlement at their companies.
Behind the stream of scandals at iconic names including Toshiba Corp. and Nissan Motor Co. is an effort pushed by Prime Minister Shinzo Abe to reshape the rules for how firms operate. In March, a state-appointed panel proposed revisions to the corporate governance code with an eye on reducing cross-shareholdings and increasing use of independent advisory committees for nominating executives or deciding pay.
“I suspect more scandals will emerge but governance will very quickly start to improve,” Medd says. “The change will flush out lots of past bad behavior. Ironically, the more scandals now, the less in the future.”
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