Analyzing Kobe Steel's Ethics Violation: A Business Case Study

This case study examines the ethical violations committed by Kobe Steel, a major Asian steel and metal conglomerate, in 2018. The company falsified quality data, supplying substandard steel to over 680 consumers, including major automakers, thereby boosting profits illegally. Senior managers were aware of and even supported this culture of deceit. The consequences included the resignation and dismissal of executives, salary cuts for directors, reduced customer trust, and damage to brand reputation. The disciplinary actions taken by Kobe Steel are viewed as a necessary step to enforce discipline, protect the company's image, and ensure the provision of quality products with integrity and transparency, while also challenging the organizational culture and corporate behavior.

Running head: BUSINESS ETHICS 1
Business Case for Ethics Violation
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BUSINESS ETHICS 2
The Situation
The Kobe Steel is one of the largest steel and metal conglomerates in Asia and Japan. In
2018, the company was involved in a fake data scandal after reports showed that metals and
steeps supplied to different consumers and retailers were of low quality as opposed to what was
indicated in their quality reports and documentation. What is worse is that senior managers were
aware of a culture of falsifying inspection reports and information, but they did nothing to
address this loophole. Worst still, the senior managers engaged in gross misconduct by
supporting and perpetrating such falsification and failing to take action when junior employees
faked inspection information (Kageyama, 2018). This incidence not only pointed to a hazardous
pursuit of profits, but it also led to the setting of unrealistic targets, which created an
organizational culture of deceit and the falsification of information (Kageyama, 2018).
The Ethical Violation
Companies and enterprises are required to uphold the highest values and ideals in their
regular business engagements. Unfortunately, Kobe Steel falsified quality information and in the
process supplied low-quality steel and metals to over 680 consumers. This means that consumers
received products that were allegedly indicated as, ‘'meeting the technical and functional
standards'' but instead the steel did not meet the required benchmarks and in the process putting a
significant threat to automakers like Toyota, Suzuki, Subaru, Ford, and Honda. The Associated
Press (2018) source identifies that the falsification of quality assessment data and information
was done to boost profits illegally through the provision of substandard steel. Although no
consumer reported failures in the low-quality metals and steel, falsification of standardization
information was a sheer infringement and a stark ethical issue.

BUSINESS ETHICS 3
The Consequences
Kobe steel has over 200 subsidiaries and approximately 61 affiliates. The falsification of
technical data affected products and supplies distributed to over 600 companies including copper
tubes and aluminum castings for autos, aircraft, trains, and other appliances. This scandal of fake
data led to the resignation of the Vice President of the copper and aluminum divisions. Two
additional managing executive officers in the copper and aluminum operations were dismissed
for the above misconduct. Two additional directors were dismissed, and all the company
directors faced a 10% to 50% salary cuts for a period of one to four months (Kageyama, 2018).
The short-term consequence of this case further includes; a reduced sense of customer trust, a
breach of consumer confidence, and a dwindling brand reputation that threatens future sales and
overall profitability.
Personal Argument
Falsification of data and information to dupe consumers into buying low-quality products
is a gross misconduct and a violation of common business practices (Saylor Organization, 2019).
Personally, the action of the Kobe company to fire heads of the aluminum and copper
departments, impose significant pay cuts on directors, and dismiss top executive officials was a
sound and a strategic business move. It served as a basis of Kobe Inc. commitment to enforce
discipline, protect its image, and in the process provide functional and quality products to
consumers, of course by upholding integrity, honesty, and transparency. Additionally, the
disciplinary measures served as a lesson to the existing workforce and in the process challenged
the organizational culture and corporate behavior (Frederick, 2009).

BUSINESS ETHICS 4
References
Frederick, R. (2009). A companion to business ethics. Malden, Mass: Blackwell Publishers.
Kageyama, Y. (2018). Kobe Steel Chief Steps Down over Massive Fake Data Scandal. The
Associated Press Official. Retrieved from
https://apnews.com/ca0437b0e46b4a998e4cff9c14fad5f3
Saylor Organization. (2019). Chapter 1: What is Business Ethics? The Saylor Organization. Pg.
1 – Pg. 43.