A bizarre practice has taken root within the corporate world. Trumping actual ethical practice is the trend whereby companies admit to unethical behaviors in an effort to gain consumer trust. The latest confessions come by way of “Japan Inc.”
Last week, within the span of a 24-hour period, the world was flooded by confessions from Japan’s Toyo Tire & Rubber Co., Asahi Kasei Corp (a chemical company with global reach), and Matsumotokiyoshi Holdings Co. (a pharmaceutical chain).
The admissions come only weeks after corporate giants Takata Corp. and Toshiba made their own malfeasance public.
Toyo Tire & Rubber Co. revealed that one of their units altered quality testing data for rubber products. The products were distributed to 18 major customers over the decade. Matsumotokiyoshi Holdings Co. believes that recent accounting discrepancies were caused by one of their unit presidents inflating inventories to conceal losses. Asahi Kasei Corp forged data for foundation piles used in condos. The result? A noticeable lean to one of their structures. Takata Corp. sold defective airbags; 40 million vehicles were recalled. Finally, Toshiba has admitted to artificially manipulating profits for the last seven years.
Although Toshiba identified 30 executives with whom to attribute the wrongdoings, no employees will face dismissal.
Earlier this year, Prime Minister Shinzo Abe called for an entirely new regulatory institution, one in which corporate proceedings are more transparent. Since assuming office in 2012, Abe has forged ahead with plans to revive Japan’s economy through huge economic stimulus packages, better known as quantitative easing.
Japan’s revival, however, has been stifled by four quarters of recessions during Abe’s term.
On the other hand, Abe has managed to facilitate rising stock prices and bottom lines for many Japanese corporations.
Despite the prime minister’s remodeling initiative, some argue that these parties continue to get away virtually scot-free.
Jeff Kingston, a director of Asian Studies at Temple University in Tokyo, likened the scandals to a game of “whack-a-mole,” elaborating that “it’s hard to keep track of them.”
Not an Isolated Case
Unfortunately, this is problem is not a localized one.
Quebec-based pharmaceutical company Valeant (NYSE, TSX:VRX) has also been accused of malfeasance. The commentators at Citron Research claim that Valeant has been using a “specialty pharmacy” called Philidor RX Services. Essentially, Philidor was used to store Valeant’s excess inventory; the accounting fraud occurred when the company recorded those transactions as sales.
The reports alone cannot be cited as verifiable proof of corrupt practice, however analysts at Arfaei, JPMorgan Chase & Co. (NYSE:JPM) and other banks remain suspicious of the pharmaceutical company.
“We find Valeant’s arrangements with the specialty pharmacy Philidor as not just aggressive, but questionable," said Arfaei.
One cannot help but draw comparisons to the fallen Enron, the energy and commodities company now infamous for its fraudulent accounting practices in the late 1990s.
Valeant has responded with the following statement:
“We categorically deny the allegations made in the Citron Report. Citron’s false and misleading statements about Valeant appear to be an attempt to manipulate the market in an effort to drive down Valeant’s stock price.”
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