Analysis of Kobe Steel, Mitsubishi Materials and Corporate Governance

This report provides an in-depth analysis of the Kobe Steel and Mitsubishi Materials scandal, focusing on corporate governance failures, ethical breaches, and their impact on stakeholders. It examines the issues of data falsification, discrepancies in corporate social responsibility (CSR), and the imp...Read More

Kobe Steel,
Mitsubishi
Materials
and Japan’s
Corporate
Governance
Woes

EXECUTIVE SUMMARY
This report has been targeting the scandal in Kobe Steel, Mitsubishi Material. There are
various factors has been analysed in the report that are related to the sustainability factors for the
organization. all these factors has been analysed in the repot that can be considered by the
organization to avoid the business ethical issues in actions of the company. All the actions
performed by organization after scandal also has been studied in report.

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Corporate Governance.................................................................................................................4
Corporate Social Responsibility..................................................................................................5
Carroll's Pyramid for Corporate Social responsibility.................................................................5
Discrepancies in CRM done by Kobe Steels...............................................................................6
Sustainability...............................................................................................................................7
Triple Bottom Line......................................................................................................................7
Ways to Promoting Sustainability of organization......................................................................7
Discrepancies in Claims Organisation.........................................................................................7
PART 2............................................................................................................................................8
Normative Theory........................................................................................................................8
Descriptive Theory......................................................................................................................8
PART 3............................................................................................................................................8
Perspective of Different Stakeholder...........................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business ethics can be considered as approaches of implementing appropriate business
policies and activities to overcome the arguably subjects with in the organization. This is
important for the business organization to full fill all the business activities along with following
business ethics with in organization. There are various ethical consideration are used by the
organization to meet their organizational target with higher efficiency. This report is providing
brief of Kobe Steel, Mitsubishi Materials, and Japan’s Corporate Governance Woes. Mitsubishi
is one of the largest manufacturing organization (Crane, Matten and Spence, 2019). Mitsubishi
Materials was established in year 1871 by Yataro Iwasaki. The Headquarter of the organization
is in 3-2, Marunouchi 3-chome, Chiyoda-ku, Tokyo, Japan. Sustainability is most important for
the business organization. This can help the organization to manage and keep their business
operations sustainable from the perspective of economy, society and environmentally. This
report is analysing scandal of information falsification that is performed by Mitsubishi Materials
in year 2017. This business case has been studied from different business perspectives in order to
analyse various ethical issues that are analysed in the scandal of data falsification.
Issues with Mitsubishi
This is important for the business organization to maintain and follow all the business
ethics with in the business organization in order to maintain effective business practices in the
organization. By following ethics organization can make proper arrangements to perform
effective business in market place. There are different ethical consideration that need to be
followed by organization to keep business sustainable from different perspective. In the case of
Mitsubishi Materials main issue that is found is data falsification. In this scandal company has
provided false data related to the material used in the products that are made with aluminium and
copper. In this case company has admitted that one of its subsidiaries has falsified the data
regarding the material that is used in production of products that are used in crucial parts of cars,
air crafts (Grayson and Hodges, 2017). The Mitsubishi Materials is one of the largest
manufacturing organization that is working with Kobe Steel Ltd on copper tube joint venture. It
has been found that company is falsifying the product quality data. It has rose high pressure on
manufacturing organization in Japan. As per the statement of Mitsubishi Materials that
Mitsubishi Cable industrial unit had falsified data since April 2015 related to the quality of
rubber o - rings that are used to prevent the leaks in the air crafts, cars and other equipment’s.
There some issues were also found in the subsidiary of company that is producing metal

products. The quality standards of metal products were found below quality standards that are
claimed in data provided by the company. This is one of the most critical ethical issue that is
admitted by Mitsubishi Material in year 2017.
The actions that are taken by the Mitsubishi material regarding the scandal of data
falsification can be considered as violation of business ethics in corporate environment. Falsified
data provided by the company was related to the metal products which are used in cars, air craft
and other mechanical instruments. The products are found under the quality claims that are made
by the production subsidiary. After this scandal was uncovered by internal analysis of
organization senior leaders of organization have made apology in a press conference. The action
that is performed by organization management and leader ship was good and gentle but there are
some other actions also can be done by company. In the production of these metal products
substandard material was used by organization. So this is duty of organization to provide
compensation to the companies who have bought the product of Kobe Steel. By this process they
would be able to full fill their business ethics in market place (Lins, Servaes and Tamayo, 2017).
Corporate Governance
Corporate governance can be defined as rules and laws that need to be followed by each
business. Companies are monitored and regulated by these code of conduct of corporate
governance.
Carroll pyramid model of CSR explains that there are certain responsibilities that need to
be fulfilled by each company. Economic responsibility means business has to make profit to
contribute well in economy of nation. Legal responsibility means to follow all rules carefully and
take care that all employees follow these regulation properly (Schrempf-Stirling, Palazzo and
Phillips, 2016). Ethical responsibility means companies need to act ethically as they have to give
respect to all its stakeholders. Philanthropic responsibility states that firm has to work for society
welfare as well.
In the case of Kobe steel, company has hide details regarding quality of material with its
consumers and other stakeholders. Falsifying data regarding quality is wrong ethic.
Kobe was responsible for transparency but it has not followed that responsibility. CEO of
company needs to maintain transparency. All board of director and other important authorities
need to share required information with right person. This falsifying data has affected the
reputation of business to great extent.

Accountability is necessary practice that must be ensured in business unit. Board of
director, fiscal council, CEO are responsible person to maintain accountability in firm. These
bodies need to work so that company can manage operations well. Faulty airbags of Takata were
responsible for death of many person hence these bodies failed to perform their responsibilities
well.
Fairness is another essential code of conduct of corporate governance where it is
responsibility of business to treat all stakeholders fairly without hiding anything.
Corporate Social Responsibility
There are different actions are performed by the business organization in target market
that are based on self-regulatory business model of organization (Hopkins, 2016). This model are
used by the organization to maintain their social accountability in order to meet all the ethical
and social requirement. By following this model organization will be able to perform various
standards with in organization to full fill needs of stake holders, employees and public. The main
purpose of the corporate social responsibility is to make proper investment in the activities that
are performed by the organization for the well being of people to over come the impact of their
actions in order to avoid negative impact of organizational operation in target market. The main
objective of the organizational regarding corporate social responsibility is to meet sustainable
need sof organization for environment society and economy of country. By implementing this
system in company practices Mitsubishi Material can improve their brand value in target market.
Carroll's Pyramid for Corporate Social responsibility
It is a simple frame work that is used by the organization to justify that why they have to
implement and meet Corporate Social Responsibilities. The key features that are used in this
model are- profit must be considered first, implication of all laws and regulation in the operation
of organization and meet all the ethical duties of organization. This model is based on four
consideration to justify the needs of following CSR policy in company (Jamali and Karam,
2018). These considerations are- Economic, Legal, Ethical and Philanthropic. By this evaluation
process it can be found that why this is important for the organization to implement corporate
social responsibilities in Kobe Steel.
Economic
This is most important for the organization to meet all the profit in order to compete with
its competitor in market place. For gaining profit from market place this is important or the
business organization to implement corporate social responsibility with in organization.

Legal
There are some laws and regulations are also need to be followed by the organization to
keep its actions legal in market place. The CSR model that is implemented by organization can
help the organization to full fill all the requirements of legislation and regulations that are
designed by the legal authority of country.
Ethical
This is main part of implementing CSR policy in organization. This can help the
company to full fill all the ethical requirements of organization in business operations. this how
implementation of CSR will be effective for the organization.
Philanthropic
There are some actions are performed by the organization that have negative impact on
performance of organization. This is responsibility of the company to compensate the damage
that is done by them by their business operations. By implementing CSR in organization
company will be able to recover the damage to society, economy and environment.
In the case of Kobe Steel this is important for the company to implement the Corporate
Social Responsibility in business practices in order to avoid ethical damage caused by
falsification of information regarding quality standards of products that are developed by Kobe
Steels (Cui, Jo and Na, 2018).
Discrepancies in CRM done by Kobe Steels
There are some responsibilities of the organisation regarding ethics in market place. This is
important for Kobe Steels to provide specific and accurate measures of quality standards of
products that have been developed by the company in their manufacturing plant. In this case
Kobe Steels has provided false information to its clients who are using these products in their
manufacturing plant or the products like Air craft, Cars and mechanical instruments. Here the
main discrepancies in the information that is provided by them to the client companies. This false
information could have lead the organization or people associated with their products. This is
how Kobe Steels have violated the ethical standard of CSR policies.
Consistency of Organization with its Claimed Values
This is duty of the organization to provide accurate and precise information to its clients
to protect their rights and avoid the cases of violating their basic fundamental rights. The change

that are evaluated in the quality data of company report that is provided to the client. It can not
be considered as major mistake that is performed by organization but due to regular issues in
data provided to the client can be considered as intentional changes and misleading information
to the customer of the company (Trevino and Nelson, 2016). This is how the information that is
provided to client in form of quality report shows the major inconsistency in reports of Kobe
Steel Company. As per this situation do not reflect the high value services of company to its
clients.
PART 2
Normative Theory
Deontology
According to this theory the actions of organisation should be based on morals that are
justifying right or wrong decision of the company in business operation and this morality should
be based on series of rules and regulations instead of on basis of consequences of actions. This is
how actions of organisation can be kept good for ethical practices of organisation. This theory
can be used by the Mitsubishi Material to maintain good practices in business process to get
better result with business and ethical standards.
Descriptive Theory
Individual Factor Theory
Behaviour of a person or ethical behaviour of person at work can be affected by different
factors that are present within the organisation. These factors are knowledge, values, personal
goals, professional development, individual growth, morals and personality. More knowledge
possesses by organisation can help them effective way to keep their actions ethical in the market
place. This is how Mitsubishis Material can use this to maintain their business standards ethical
and sustainable in market place.
PART 3
Perspective of Different Stakeholders
Impact of Ethical Practice on Internal and External Stakeholder
The impact of ethical practices have positive impact on internal and external stakeholder
of organisation. It can help the company to implement better work standards within the

organisation. The internal stakeholder of organisation are – employees, managers, company
owner, leaders and entire workforce (Pearson, 2017). These people will be benefited by ethical
practices that have been implemented by the organisation in work practices and it will boost their
performance. This ethical practices will be highly positive for the organization to get better result
with actions that are followed by the organization. This will also improve the impact of
organization on external stakeholders of company.
Impact of Unethical Practices on Internal and External Stakeholder
The impact of unethical practice are highly negative for the performance internal
stakeholders of organisation. The falsification of the organisation admitted by Mitsubishi
Material is highly negative for motivation level of employees along with other internal and
external stakeholder of organisation. Unethical practices of organisation can reduce the brand
value of the company in market place and affect its performance standards in current market
scenario. This can affect people or stakeholders inside and outside the organisation. This can
affect their motivation and affect their loyalty to the organization.
This is how the impact of ethical practices is good and positive for performance and
motivation of internal and external stakeholders of company. On the other hand unethical
practices can majorly affect and decrease performance and motivational level of internal and
external stakeholder of organisation in functions and market operation. This is how impact of
ethical and unethical practices of Mitsubishi Materials in business operation.
CONCLUSION
This report is concluding importance of ethical sustainable and profitable business strategies
for Mitsubishi Materials in international market scenario. This scandal of Kobe Steel Company
has been studied and analysed throughout the whole report to understanding how data
falsification can lead business organisation to negative performance and brand value in market
place. The importance of corporate social responsibilities has been studied and analysed in
report. The effectiveness of ethical practice also has been evaluated to found its impact on
internal external stakeholder of organisation. Various recommendations has been made to
improve the business procedure of company in market place.
RECOMMENDATIONS
There are different changes can be made by organisation in business practices and
monitoring process to effectively control the functions and decision that are taken by lower level

management of organisation. There are various technologies like artificial intelligence,
automation, information system, digital technology and smart controlling system to effectively
control actions of organisation in target market. All these changes can lead company to
implement effective and better business standards within Mitsubishi Material.

REFERENCES
Books and Journals
Crane, A., Matten, D. and Spence, L. eds., 2019. Corporate social responsibility: Readings and
cases in a global context. Routledge.
Cui, J., Jo, H. and Na, H., 2018. Does corporate social responsibility affect information
asymmetry?. Journal of Business Ethics. 148(3). pp.549-572.
Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make
corporate social responsibility work for your business. Routledge.
Hopkins, M., 2016. The planetary bargain: corporate social responsibility comes of age.
Springer.
Jamali, D. and Karam, C., 2018. Corporate social responsibility in developing countries as an
emerging field of study. International Journal of Management Reviews. 20(1). pp.32-
61.
Lins, K.V., Servaes, H. and Tamayo, A., 2017. Social capital, trust, and firm performance: The
value of corporate social responsibility during the financial crisis. The Journal of
Finance. 72(4). pp.1785-1824.
Pearson, R., 2017. Business ethics as communication ethics: Public relations practice and the
idea of dialogue. In Public relations theory (pp. 111-131). Routledge.
Schrempf-Stirling, J., Palazzo, G. and Phillips, R.A., 2016. Historic corporate social
responsibility. Academy of Management Review. 41(4). pp.700-719.
Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do
it right. John Wiley & Sons.
[Online]. Available through : <>. Please complete the reference.
Appendices:
You must add the Edward Snowden Case Notes here. The notes that you used for the class
discussion.