January 27, 2023

Another Scandal Unsettles Corporate Japan

TOKYO — It is the second wild boardroom drama to shake up corporate Japan in days: the country’s leading tissue maker, Daio Paper, said on Friday that it would file a criminal complaint against its former chairman, accusing him of illicitly borrowing $140 million in company funds and channeling some of that money to a Las Vegas casino company.

The controversy provides yet another lens into the seemingly free-wheeling behavior — and disregard for corporate governance — still seen among top management at some of Japan’s leading companies.

Olympus, the medical imaging and digital camera maker, has lost half its stock market value this month since its ousted chief executive released internal documents that he said showed the company made over $1 billion in improper payments over a series of acquisitions.

But the scandal at Daio Paper, which makes the best-selling Elleair brand of tissues in Japan and other paper products, is unique because the company has made public the ex-chairman’s alleged shenanigans. In a report filed with the Tokyo Stock Exchange on Friday, the company also acknowledged gross lapses in its corporate governance.

According to the report, the former chairman, Mototaka Ikawa, routinely ordered subsidiaries to deposit money into his personal bank account and to an account held by a Japanese subsidiary of the casino operator Las Vegas Sands. Mr. Ikawa has since repaid almost half of the money, the report said, but has claimed he used the rest on currency trading and dealing on the stock market.

Mr. Ikawa has denounced the report, calling it biased, but has not responded publicly to specific charges, according to the public broadcaster NHK. The report says that Mr. Ikawa has admitted to borrowing some of the money, but has suggested he intended to return it. But he failed to turn up at most of the meetings requested by the authors of the report, it said.

Daio Paper’s share price has dropped about 15 percent since reports about the loans started surfacing in the local media. Mr. Ikawa stepped down on Sept. 16.

“I apologize from the bottom of my heart for the discovery of 10.7 billion yen in loans to our former chairman, which has brought great inconvenience to our shareholders,” the president of Daio Paper, Masayoshi Sako, told a packed news conference.

Mr. Sato said the company had also fired Mr. Ikawa’s brother, a board member, Takahiro Ikawa, and their father, Takao Ikawa, who is an adviser to Daio Paper and a former chairman. His father, Isekichi Ikawa, founded the company in 1943.

The dominance still wielded by the founding family was excessive, Mr. Sato said, though he added that the company would still ask Takao Ikawa for advice from time to time. The Ikawa family is a major shareholder in the company.

According to the report filed with the stock exchange, which the company said was prepared by an outside panel of legal experts, Mr. Ikawa ordered seven subsidiaries to lend him a total of 10.68 billion yen between May 2010 and September 2011. He has since repaid 4.75 billion yen.

“In many cases, the former chairman would unilaterally demand: ‘You must deposit X million yen into my account by tomorrow,’ ” the report said. Executives at the subsidiaries knew Mr. Ikawa wanted the funds for personal use but did not question him, and the loans were made without collateral, it said.

Some of the subsidiaries were forced to take on more debt to cover for the loans to Mr. Ikawa, the report said. In the year to March, the company booked a net loss of 8 billion yen on sales of about 410 billion yen.

According to the report, Mr. Ikawa demanded that the money be paid into a personal account held under his name or to the casino company, sometimes through another Daio Paper subsidiary. Daio Paper has no business dealings with Las Vegas Sands, the report said.

In a harsh self-criticism, the report said that company executives, board members and even its auditors turned a blind eye to the loans.

“At the Daio Paper Group, speaking out against the Ikawa family has not been condoned,” the report said. “When the former chairman asked for a transfer of funds, his wishes were obeyed without question.”

Daio Paper said that it would ask Mr. Ikawa to repay the remaining 5.93 billion yen and investigate how he used the money.

The company also announced a 50 percent pay cut for the president, Mr. Sako, and other censures for its board members, and said it would set up a special committee to study ways to bolster its corporate governance.

Article source: http://www.nytimes.com/2011/10/29/business/global/new-scandal-presses-corporate-japan.html?partner=rss&emc=rss

Labor Board Tells Boeing New Factory Breaks Law

In its complaint, the labor board said that Boeing’s decision to transfer a second production line for its new 787 Dreamliner passenger plane to South Carolina was motivated by an unlawful desire to retaliate against union workers for their past strikes in Washington and to discourage future strikes. The agency’s acting general counsel, Lafe Solomon, said it was illegal for companies to take actions in retaliation against workers for exercising the right to strike.

Although manufacturers have long moved plants to nonunion states, the board noted that Boeing officials had, in internal documents and news interviews, specifically cited the strikes and potential future strikes as a reason for their 2009 decision to expand in South Carolina.

Boeing said it would “vigorously contest” the labor board’s complaint. “This claim is legally frivolous and represents a radical departure from both N.L.R.B. and Supreme Court precedent,” said J. Michael Luttig, a Boeing executive vice president and its general counsel. “Boeing has every right under both federal law and its collective bargaining agreement to build additional U.S. production capacity outside of the Puget Sound region.”

It is highly unusual for the federal government to seek to reverse a corporate decision as important as the location of plant.

But ever since a Democratic majority took control of the five-member board after Mr. Obama’s election, the board has signaled that it would seek to adopt a more liberal, pro-union tilt after years of pro-employer decisions under President Bush.

Although the board has not yet issued many major decisions reversing Bush-era policies, it has begun requiring private sector employers to post a notice about workers’ right to unionize, and Mr. Solomon has begun moving more aggressively to win reinstatement of union supporters fired illegally by management during unionization drives.

In a statement Wednesday, Mr. Solomon said: “A worker’s right to strike is a fundamental right guaranteed by the National Labor Relations Act. We also recognize the rights of employers to make business decisions based on their economic interests, but they must do so within the law.”

South Carolina’s two senators, both Republicans, Lindsey Graham and Jim DeMint, denounced the board’s move. “This is nothing more than a political favor for the unions who are supporting President Obama’s re-election campaign,” Mr. DeMint said.

The labor board said that in 2007, Boeing announced plans to create a second production line that would make three 787 Dreamliner planes a month in the Puget Sound area to address a growing backlog of orders. That was to be in addition to a line already making seven Dreamliners a month there. In October 2009, Boeing said it would locate its second line at a new, nonunion plant in South Carolina.

The N.L.R.B. asserted that on numerous occasions Boeing officials had communicated an unlawful motive for transferring the production line, including an interview with The Seattle Times in which a Boeing executive said, “The overriding factor was not the business climate. And it was not the wages we’re paying today. It was that we cannot afford to have a work stoppage, you know, every three years.”

Mr. Solomon brought the complaint after a union representing many of Boeing’s Washington workers, the International Association of Machinists and Aerospace Workers, complained that Boeing had decided to move production to South Carolina largely in retaliation for a 58-day strike in 2008.

“Boeing’s decision to build a 787 assembly line in South Carolina sent a message that Boeing workers would suffer financial harm for exercising their collective bargaining rights,” said the union’s vice president, Rich Michalski.

Mr. Solomon said that if he failed to settle the dispute, an administrative judge would begin hearing the case on June 14 in Seattle. Mr. Solomon said he was not seeking to close the South Carolina factory or prohibit Boeing from assembling planes there.

Boeing criticized the timing of the N.L.R.B.’s complaint, saying it came when construction of the factory in North Charleston, S.C., was nearly complete and after 1,000 employees had already been hired there.

Boeing said on Wednesday that none of the production jobs in South Carolina had come at the expense of jobs in Washington. It noted that its unionized employment in the Puget Sound area had increased by 2,000 since it announced its decision to expand in South Carolina.

The company also said it had decided to expand in South Carolina in part to protect business continuity and to reduce the damage to its finances and reputation from future work stoppages.

Article source: http://feeds.nytimes.com/click.phdo?i=00fb8927c4156332e42601ef93a09e12