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Kobe Steel CEO steps down over data fabrication scandal
Original source: Mainichi- Japan

Screen Shot 2018-03-07 at 3.38.43 PM.png Kobe Steel Ltd. said Tuesday its chief executive officer will resign following a scandal over the fabrication of data for products delivered to a wide range of industries, while announcing that it has found more quality problems.

Japan's third-largest steelmaker said it approved the resignations of CEO Hiroya Kawasaki and Akira Kaneko, executive vice president and head of the aluminum and copper business, at a board meeting on Monday. Kobe Steel will pick the new leaders next month, Kawasaki said.

The resignations of Kawasaki and Kaneko, both 63, will be effective April 1.

The company also revealed Tuesday that it has found that more affected products were shipped to some 163 companies, with the total number expanding to over 600 firms.

"I have to say that there is a grave problem in our organization, and the mindset of employees...We will make all-out efforts to radically reform our organization and corporate culture," Kawasaki told a press conference.

"As we have caused so much trouble, I hope to show that Kobe Steel has changed. I will step down so the company can quickly move forward under a new management," he said.

The company also unveiled its final report on the data fabrication scandal, compiled by an external probe committee consisting of lawyers.

The probe found that the management focused only on profits and an organization with insufficient governance lay behind the scandal, which may have begun more than four decades ago. It also pointed out that pressure to meet deadlines and Kobe Steel's closed corporate culture led to the lapses.

The company said that more than 40 employees were involved in the string of irregularities including two who later became board members. A list of steps for carrying out data rigging was found at its aluminum and copper subsidiary, the report showed.

For preventive measures, the company said about one third of its board will now comprise outside members and its chairman post will be abolished. The company said it will also launch a quality control governance committee made up of external experts.

Kobe Steel said last October it found inspection data had been fabricated on some aluminum and copper products shipped to hundreds of companies including Toyota Motor Corp. and Mitsubishi Aircraft Corp., a subsidiary of Mitsubishi Heavy Industries Ltd.

More data fabrication cases were discovered later in steel products used in trains, rockets and defense equipment as well as businesses overseas, leading the company to lose the Japanese Industrial Standard certificates for several of its products.

The U.S. Department of Justice is also investigating the scandal.

Kawasaki took the helm of the steelmaker in 2013 and streamlined its production lines while diversifying revenue sources by strengthening the aluminum and electricity businesses.

Kaneko headed the aluminum and copper division from 2014 before becoming executive vice president in 2015.

In November, Kobe Steel released the results of an internal probe, saying its closed corporate culture and an overemphasis on meeting delivery dates lay behind the scandal.

Kobe Steel is not new to scandals.

In 1999, the company was found to have given funds to a "sokaiya" corporate racketeer. In 2006, it was hit by a data fabrication scandal after an internal investigation found that data on soot and smoke released by one of its plants had been falsified.

A Kobe Steel subsidiary was found cheating on steel inspection data in 2008 while the head of Kobe Steel resigned in 2009 over illegal donations involving local assembly elections. Lack of legal compliance led to another quality issue at another unit in 2016.

Asked why the steelmaker has failed to prevent the string of scandals, Kawasaki said that the company had only been applying "a topical therapy" each time a particular problem was detected.

"We need to seriously enhance quality and risk control altogether or we will lose trust completely," Kawasaki said.

The Japanese steelmaker also announced Tuesday that two managing executive officers who knew of the irregularities had resigned the same day while an executive officer will face his pay cut by 80 percent for four months.

All other executive officers and all board members, excluding outside directors and members of the audit and supervisory committee, will have 10 to 50 percent pay cuts for one to four months, while Kobe Steel will ask the two former executives directly involved in the lapses to voluntarily return some of their remuneration.

The presidents at two subsidiaries -- Kobelco & Materials Copper Tube Co. and Shinko Metal Products Co., where affected products were mostly shipped from -- will resign as of April 1.

Japan's manufacturing sector was thrown into crisis last year following a string of quality control problems which also came to light at Nissan Motor Co., Subaru Corp. and other companies.

Last week, Subaru picked a new president to revamp top management and enhance quality control following the revelation of a fresh car inspection scandal.

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