Corporate Ethics in Kobe Steel Management

  In this report we will discuss about management and below are the summaries point:- Kobe Steel is a giant steelmaker with a large volume of customers like Toyota, Honda, Nissan and Ford, making them one of the largest steel manufacturers in the world and the third largest in Japan. However, in 2018, Kobe Steel faced allegations of unethical practices where the company deliberately falsified data of supplied steel to its automobile manufacturing clients. The Independent Investigation Committee (IIC) revealed that the upper echelon of the company was also informed and aware of the unethical behavior but failed to prevent it due to their direct involvement in those unethical practices before becoming the executive officers. The stakeholders affected by the scandal include the client organizations who failed to receive the actual quality of the steel products, and the employees who were involved in the misconduct as well as those who were not but faced the consequences of the company's tarnished reputation. The potential implications of the scandal include a breach of ethical conduct and public standards, resulting in the CEO of Kobe Steel facing pressure to resign and the identification of executive officers involved in the forgery. The purpose of the investigation was to identify and clear out the people who were involved in the unethical practice.

Running Head: Management
Management
Name of the Student:
Name of University:
Author Note:

1Management
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Ethical Issues...............................................................................................................................2
Stakeholders in scandal................................................................................................................3
Potential implications of Kobe Steel...........................................................................................3
Corporate culture in ethical issue................................................................................................4
Utilitarian principles of ethics.....................................................................................................4
Aristotelian views on actions.......................................................................................................5
Kantian theory on CEO's responsibility......................................................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................8

2Management
Introduction
Kobe Steel is highly famous in the Steel manufacturing industry around the world as a
giant steelmakers with a huge volume of customers like Toyota, Honda, Nissan and Ford. This
magnanimous expansion in the international market makes Kobe Steel on of the largest in the
world and the third largest steel manufacturers in Japan. However, the organisation recently
came up with some ethical issues where the top-down hierarchy is involved. Based on this
understanding, the purpose of this report is to identify the ethical issue and make a discussion in
the light of ethical ideologies like the Utilitarian principles or Kantian ethics.
Discussion
Ethical Issues
In the year 2018, Kobe Steel had got the limelight after the revelation of unethical
practices prevalent within the organisational activities and quality of products. It was alleged that
the company deliberately falsified the data of supplied steel to its automobile manufacturing
clients. During the investigation by the Independent Investigation Committee (IIC) in 2017, the
deliberate falsification of the inspection certificates by the employees was exposed and Kobe
Steel admitted that the employees were in such practices since 2016. As a matter of fact, the
upper echelon of the company was also informed and aware of the unethical behaviour but failed
to prevent it due to their direct involvement in those unethical practice before becoming the
executive officers.

3Management
Stakeholders in scandal
As far as the stakeholders are concerned, it can be stated that a top-down organisational
system was entirely responsible for practicing unethical behaviours within Kobe Steel. For an
instance, the independent investigation revealed that within the organisational framework the
employees deliberately altered the inspection report of the copper and aluminium products. As a
result of that the client organisations failed to get the actual quality of the steel products.
Moreover, it would be wrong to judge the situation as an attempt involved the normal employees
of the company (Trevino & Nelson, 2016). As a matter of fact, the higher authority also aware of
the fact that there were some misconducts and unethical procedures existed. However, they were
incompetent enough to deal with the situation because either they hardly acknowledged the
vitality of the issue or succumbed into the practice in such a manner that was exercising before
they got the promotion.
Potential implications of Kobe Steel
Based on this, in the year 2017, Kobe Steel admitted the prolong practice of misconducts
within the organisational operation and activated an Independent Investigation Committee (IIC)
in order to find out the potential factors responsible to instigate the employees to continue the
mishaps. The thorough investigation found out that there were some breach of ethical conduct
inside the organisation in terms of fabrication f inspection data that led to the fail of maintaining
customer specification and the public standards. Furthermore, the investigative report also
revealed that the role of the executive officers was also related to this fabrication activity as they
were fully aware of the unethical practices. Two executive officers from the Aluminium and
Copper Business were identified who directly involved in this forgery and hide out the unethical
practices by not complaining the departmental head. Another executive was tried to clear out all

4Management
those non-standard products through shipments and then wanted to reconstruct the quality of
manufacturing process. On the basis of such serious allegation, the CEO of Kobe Steel faced
huge pressure to hold his position and as a result of that he had to resign from the position.
Therefore, it can be stated that the purpose of the investigation was to identify and clear out the
people who were involved in such degrading practice.
Corporate culture in ethical issue
It can be opined that the organisational culture highly responsible in order to develop a
healthy workplace practice (Wu, et al., 2015). As a matter of fact. The empirical evidences show
that there is an open and direct impact of the corporate culture on the mode of workplace culture
(Jondle, et al., 2014). In other words, it can be stated that the corporate mechanism directly
influenced the organisational activity. Therefore, the ethical business orientation of the company
is strictly based on the role of the corporate culture rather than the spontaneous inclination of the
employees to do such things (He, & Lai, 2014). Based on this understanding, it can be stated that
in case of the Kobe Steel the corporate culture of the organisation itself was infected with the
malice of unethical practices. For an example, the executive officers were part of the unethical
practices of forging and altering the inspection data so that it could not be exposed to the clients.
Tampering with the standards of the products and violating the specifications demanded by the
clients were the main aspect that Kobe Steel was practised in its organisational framework. As a
matter of fact, the upper management encouraged the employees to continue the practice and
kept the top executives in dark.
Utilitarian principles of ethics
From an utilitarian perspective, it can be argued that the unethical practice of Kobe Steel
was rightly violated the notion of Utilitarianism. In this context, the paradigm of Rule

5Management
Utilitarianism can be considered as the effective means to judge the issue (Teo, 2015). As far as
the general understanding of Utilitarianism is concerned it can be advocated that this theory tries
to develop an equal opportunity for people to enjoy happiness (ML Wallace, et al., 2014).
However, the ethical perception is somewhat different from the general identification. The
Utilitarian ethics is based on two different understanding in terms of the rule utilitarianism and
act utilitarianism (Busse, 2014). In respect to this the issue of Kobe Steel is highly based on the
perception of rule utilitarianism where the violation of the action will lead to the path of
deterioration. On the other hand, good act will formulate better opportunities and openings for
the organisation to achieve more success. In contrast to this, Kobe Steel faced serious threat to its
business orientation as the organisation damaged its reputation extensively due to the reveal of
unethical practices. From the perspective of Utilitarianism, this would lead to the losing the
standard or quality of manufacture for the client automobile companies who were relied on the
steels of Kobe Steel. Moreover, there are also some other factors like making the clients in dark
and providing them bad quality products. As a result of that it created severe safety issues in the
automobiles and Kobe Steel was rightly responsible for the loss of market expansion for the
client companies.
Aristotelian views on actions
As far as the Aristotelian principles of ethics is concerned, it is associated with the
practice of making an insights into the naturalism and self-realisation (Duska, 2014). In other
words, it can be stated that the role of the human beings is to follow the righteous path in terms
of doing good things. It is highly resembled with the paradigm of ethics of self-realisation where
the thrust is primarily focused on the deeds and the consequences after that (Fernando &
Moore, , 2015). As per the principle of ethics manifested by Aristotle, good is not a disposition

6Management
rather it prescribes a teleological system that connotes the involvement of actions (Queiroz,
2015). This main theme of the Aristotelian principle has a close affinity and resemblance with
the activities of the employees in Kobe Steel. The manufacturing unit of the company, especially
the employees practised such malfunctions related to the ethical breaching of the organisational
activity. In this regard, the employees deliberately altered the inspection report and falsifying the
reports so that the client companies would trust on the quality and standard provided by Kobe
Steel. However, in reality the standard an quality was way poor than the client requirements and
specification and seemed to a breach of conduct that the company was practised.
Kantian theory on CEO's responsibility
In response to this, the Kantian Ethics is also considered to be a relevant theory to point
out the role of the CEO and his competencies in order to ensure right organisational framework
and ethical considerations (Michaelson, et al., 2014). In this regard, the Kantian ethics is
identified as a part of the deontological moral theory where the duty of an individual is more
important than the mode of actions (Macklin , et al., 2014). From that point of view, it can be
derived that the role of the CEO in Kobe Steel is not effective enough or having any control over
the employees to prevent preparing false report on the quality check.
Conclusion
From the above point of view, it can be asserted that there are huge ethical gaps existed
within the organisational spectrum of Kobe Steel which further perturbed and damaged the
image of the company. In this context, the report tries to identify the key issues in order to
understand the way ethical considerations had been breached. Moreover, there are also the
implications of some ethical theories and principles that help to underline the exact ethical

7Management
breach of the company. In response to this, the theory of Utilitarianism and Kantian deontology
are incorporated into the discussion in association of the Aristotelian principles of ethics.
Therefore, it can be concluded that the report is highly relevant and effective enough in order to
highlight the ethical breaching with explaining the theories of ethics.

8Management
References
Busse, R., 2014. Corporate culture, organizational change and meaning at work-linking human
resources with business ethics. Human Systems Management, 33(1-2), pp. 47-50.
Duska, . R. F., 2014. Why business ethics needs rhetoric: An Aristotelian perspective.. Business
Ethics Quarterly, 24(1), pp. 119-134.
Fernando, M. & Moore, , G., 2015. MacIntyrean virtue ethics in business: A cross-cultural
comparison.. Journal of business ethics, 132(1), pp. 185-202.
He,, Y. & Lai, K. K., 2014. The effect of corporate social responsibility on brand loyalty: the
mediating role of brand image. Total Quality Management & Business Excellence, 25(3-4), pp.
249-263.
Jondle, D., Ardichvili, A. & Mitchell, . J., 2014. Modeling ethical business culture: Development
of the ethical business culture survey and its use to validate the CEBC model of ethical business
culture.. Journal of Business Ethics, 119(1), pp. 29-43.
Macklin , R., Mathison , . K. & Dibben, M., 2014. Process ethics and business: Applying process
thought to enact critiques of mind/body dualism in organizations. Process Studies, 43(2), pp. 61-
86.
Michaelson, C., Pratt, M. G., Grant , A. M. & Dunn, C. P., 2014. Meaningful work: Connecting
business ethics and organization studies. Journal of Business Ethics, 121(1), pp. 77-90.
ML Wallace, H. F., Hoover, K. B. & Pepper, M., 2014. Multicultural ethics and diversity
discourse. Equality, Diversity and Inclusion. An International Journal, 33(4), pp. 318-333.

9Management
Queiroz, R. M. D. C., 2015. Putting ethics and economic rationality together: an Aristotelian and
philosophical approach. Business Ethics: A European Review, 24(3), pp. 332-346.
Teo, T., 2015. Are psychological “ethics codes” morally oblique?.. Journal of Theoretical and
Philosophical Psychology, 35(2), p. 78.
Trevino , . L. K. & Nelson, K. A., 2016. Managing business ethics: Straight talk about how to do
it right. s.l.:John Wiley & Sons.
Wu, . L. Z., Kwan, H. K., Yim, F. H. K. & Chiu, . R. K., 2015. CEO ethical leadership and
corporate social responsibility: A moderated mediation model. Journal of Business Ethics,
130(4), pp. 819-831.