Improving Corporate Governance: A Report on the Kobe Steel Company

This report analyzes the Kobe Steel case, focusing on mechanisms to improve corporate governance. It identifies three key areas: monitoring company performance, emphasizing the board's role in employing the CEO, and understanding that effective governance extends beyond mere compliance. The report emphasizes the importance of the board's oversight in ensuring strategic alignment, ethical conduct, and adherence to production standards. It suggests regular assessments of board, CEO, and individual director performance to identify strengths, weaknesses, and areas for improvement. The analysis underscores the need for a proactive approach to governance, with the board actively involved in shaping the company's direction and ensuring accountability at all levels.

Kobe Steel Company
Q. Identify three relevant mechanisms that can be used to increase corporate governance in
the Kobe Steel company Case and explain the mechanisms that have been identified,
relating them to the case company
The three relevant mechanisms that can be used to increase corporate governance in the
Kobe Steel company case are monitoring the performance of the company, being on the know-
how that the CEO is employed by the board and finally, knowing that good and effective
governance entails many factors and not just for compliance.
(i) Monitoring the performance of Kobe Steel Company
The performance of Kobe Steel should be monitored as this is a crucial aspect and a
critical function of the board to ensure legal compliance. Monitoring the company performance
ensures that the board is aware of the decisions that the CEO and the senior management are
making and that these decisions are strategic and in line with the company's culture, mission, and
vision (Mahrani & Soewarno, 2018). This can be done by identifying the key performance
drivers of success at Kobe Steel. The directors at Kobe should have an agreed format for the
reports and see to it that anything that needed reporting was in fact, reported.
(ii) Being on the know-how that the CEO is employed by the board
In most organizations, among the major functions that the board is bestowed upon, is to
review, appoint employees, walkthrough, and replace people when necessary. The board at Kobe
Steel and their relationship with the CEO is crucial for effective corporate governance as this
would have formed an important link between the role of the board in determining the direction
and the role of management in achieving those determined objectives (Goel, 2018).

The board at Kobe failed at determining the organization's strategic direction and had to
fire the CEO and several of his vice-chairs and reduce salaries for its employees as a reaction to
the scandal. However, the board should have been aware of the situation before it happened. It
should also have done internal audits to ensure that the CEO was following the set standards of
the production process. Thus, we can conclude that the CEO and those who were sacked were
only used as scapegoats.
(iii) Understanding that good and effective governance is not just for compliance
purposes.
The board of directors needs to be able to balance the company’s compliance with
regulations, codes of practice and legislation with the performance elements of the board’s work
which is to see the organization's performance improving by creating policies and formulating
strategies. The board at Kobe Steel needs to identify its position clearly and its functions as this
will go a long way in creating a good working relationship between the board and the
management (Duhl, 2017).
In conclusion, effective cooperate governance calls for regular assessment of the
performance of the board, CEOs, and individual directors to assess the processes, competencies,
motivation and the skills of the various employees in relation to what the company needs. The
board must know their strengths and their weaknesses to be able to operate effectively while
seeking improvements every day.

References
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Making. InTech. https://doi.org/10.5772/intechopen.69707
Goel, P. (2018). Implications of corporate governance on financial performance: An analytical
review of governance and social reporting reforms in India. Asian Journal of Sustainability and
Social Responsibility, 3(1), 4. https://doi.org/10.1186/s41180-018-0020-4
Mahrani, M., & Soewarno, N. (2018). The effect of good corporate governance mechanism and
corporate social responsibility on financial performance with earnings management as mediating
variable. Asian Journal of Accounting Research, 3(1), 41–60. https://doi.org/10.1108/AJAR-06-
2018-0008