WACC1000 Accounting: Ethical Analysis of Kobe Steel's Scandal

This case study analyzes the ethical issues surrounding Kobe Steel's quality scandal, where the company falsified data and sold substandard products to unknowing customers. The report examines the decisions made by the parties involved, highlighting breaches of integrity, objectivity, professional competence, due care, and professional behavior. It further discusses the impact of these unethical practices on stakeholders and businesses, including potential job losses, mental distress for employees, and negative consequences for companies relying on Kobe Steel's raw materials. The study concludes that adhering to business ethics is crucial for long-term organizational survival and building trust with stakeholders and shareholders.

Accounting in Society

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Ethical issues the company has incurred.....................................................................................1
Determination of decisions made by the parties involved and whether they match with its
ethics or not.................................................................................................................................1
How stakeholder and businesses were impacted by the ethical issues.......................................2
Opinion of mine on business ethics and how they have changed my perspective......................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
The project file reflects the ethical issues faced by the corporate house and which has
diverted the whole attention of media towards this case. Kobe steel, operating worldwide under
the brand Kobelco is well-known, one among the largest metal making company with more than
200 subsidiaries and 62 companies in which it holds minority shareholding. However,
organization deals in the steel, titanium, welding robots, system aluminum, copper products and
construction and industrial machinery cranes. This report will look into the ethical issues faced
by the parties and what necessary decisions were made. Further, in this principle, impact on the
stakeholders and businesses are also included which will impact company with economy as a
whole.
Ethical issues the company has incurred.
The organization has indulged in the quality scandal by executing the unethical practices
along with providing false information on certificate. Moreover, company also have sold
products of inferior standard to unknowing customers without examining the grade that was
necessary to conduct (Sarwar and et.al., 2020). Subsequently, they have also falsified the
inspection certificates by recording untrue details which satisfies the quality level needed. The
firm has played with the sentiments of its consumers by being dishonest with them regarding the
standard of the products. Another issue corporate has faced is the failure in the construction of
cars and airplanes with their low grade metal sold to the manufacturers.
Determination of decisions made by the parties involved and whether they match with its ethics
or not.
The production department has faced the biggest failure even by being the number one
metal maker industry in the world. They have breached the many principles of ethics which are
mentioned below: Integrity and objectivity: This is the main and foremost rule that any company needs to
follow for its survival in competitive world by sticking towards the objective and moving
forward with this practice. In the case of Kobe metal firm they have breached this
principle by being dishonest with their consumers regarding the quality of the metals
they are providing to them (Snyder and Tan, 2020). Moreover, it also has not twigged
with its own objective of building the world richer and sustainable. However, they also
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promised to manufacture environment friendly products for the betterment of nature, but
they have followed none of its objective and provided poor standard product. Professional competence: Any corporate firm needs a competent task force to get timely
completion of work with due care. For this purpose organization provides their
employees an effective training. Moreover, in the case of Kobe metal they have trained
them to follow code of ethics with thorough understanding of and adherence to corporate
principles. However, by guiding them the organization only forgotten to imply it by
themselves, they have breached this principle by developing low grade product. The
corporate culture plays important role in the competency of its employees. However, it
was cleared by observing that Kobe steel follows the values that was to tell lie, and
manipulate their consumers. Due care and confidentiality: The company has breached with the principle of due care
and confidentiality by providing low graded metals to their costumers without going for
testing. The products delivered to the customers are of that much poorer quality which
can harm the lives of people with accidents (Kobe Steel Ethical Issues Case Study.
2020). The metals used by different organizations to produce car, airplanes, etc., are of
low strength power which cause the confidentiality issues among consumers before
purchasing from them.
 Professional behavior: Person who makes good decisions based on moral duty, always
comes up with conclusion that was ethical. However, in the case of Kobe metal their
previous CEO doesn't make any right decision. Moreover, he had failed to provide report
to income tax department and falsified emission of data. Further, illegal political funding
to the election parties also lead his resignation reason. Hence, this made difficult for the
consumers and shareholders to trust him further.
How stakeholder and businesses were impacted by the ethical issues.
Stakeholders are the key important personnel that helps the company to raise the funds
and become backbone for constant growth. Consequently, in the case of Kobe metal many
workers are involved, starting with their employees and ending up to the executive officers.
Therefore, due to some group the whole organization is impacted as they are not able to make
complain to the high authority as they know after that their survival in the company will become
difficult. Moreover, there are high chances to the employees of losing the job or facing mental
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torture (Kobe Steel admits data fraud went on nearly five decades, CEO to quit. 2021).
Likewise, the quality scandal has also affected other businesses to those they are supplying raw
materials. Without, checking the standard of metals executives are entering false details in the
certificate to sale their degraded goods. Subsequently, it will have a negative impact on the
production of further products by using poor quality metal.
Opinion of mine on business ethics and how they have changed my perspective.
After going thoroughly to the report I have seen many negative tactics that company is
following to have a competitive stand in the market. Previously, I think only about its internal
effect like that there will be lack in production, workers morale will goes down, and they will
not able to give their 100%. Subsequently, after this case study I got to learn this thing that
unfair practices will affect not only the internal factors but externals too. The other businesses
and economy in vast will face bad consequences of the worst quality products and causes to
more accidents.
CONCLUSION
By summing up this report it has been articulated that without following business ethics
the organization will not able to survive for a long run. Subsequently, the organization had all
time deceived its customer base by not thinking of the aftermath consequences. Therefore,
company should start focusing on the interest of the stakeholders and shareholders by providing
them good corporate structure. Further, to build a brand image they must take care about the
businesses to whom they are supplying raw materials. The organization ought to comply with its
objective honestly by applying all the rules, norms and principles of the society.
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REFERENCES
Books and Journals.
Sarwar, H and et.al., 2020. Ethical leadership, work engagement, employees’ well-being, and
performance: a cross-cultural comparison. Journal of Sustainable Tourism. 28(12). pp. 2008-
2026.
Snyder, J. and Tan, T. A., 2020. Ethical Awareness in the Age of Analytics: Views from the
United States and the Philippines. Review of Integrative Business and Economics Research. 9.
pp. 340-357.
Online
Kobe Steel admits data fraud went on nearly five decades, CEO to quit. 2021. [Online].
Available through: <https://www.reuters.com/article/us-kobe-steel-scandal-ceo-
idUSKBN1GH2SM>.
Kobe Steel Ethical Issues Case Study. 2020. [Online]. Available through:
<https://samploon.com/kobe-steel-ethical-issues-case-study/>.
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