By Professor Dr Brian To
In his latest column for IAG, Dr Brian To examines the management failures of three corporate giants – all of which could have been avoided.
JAPAN may be famous for its keiretsu, Kanban and long working hours, but one once mighty Japanese company, Toshiba, has recently fallen from grace. Between December 2016 and February 2017, Toshiba’s market capitalization fell by over ¥1 trillion. This once prestigious and proud company has been harvesting some of its key subsidiaries and more units are up for sale.
But perhaps we shouldn’t be surprised – Toshiba’s share price has been tumbling since January 2015 and despite a few short spikes late last year has been tumbling again ever since. The search for financial lifelines must surely be underway before ratings agencies start downgrading.
Since May 2015, no less than six public apologies have been made by the company’s President and Chairman for its troubles, which include certain accounting irregularities.
Toshiba is a household name. Consumer products include laptops, DVD players, refrigerators, washing machines and telegraphic equipment. So big was Toshiba in its prime that in 2006 it bought out Westinghouse – a prestigious company in its own right. Yet despite housing global brands, recent scandals have led the company into disarray with in fighting among senior executives, accounting irregularities, lack of good corporate governance, revolving door presidents, lawsuits and impractical strategy leading to its demise.
Any one of these poor management practices can cause a corporate implosion, but coupling this with Godzilla egos in the executive suite is a sure recipe for disaster. It makes a perfect candidate for future business school case studies.
Another more recent example of poor management and leadership has engulfed the now bankrupt Hanjin Shipping Co Ltd. Like Toshiba, Hanjin’s fall is a result of ego and arrogance-driven leadership leading to stubborn decision making. In February, a Seoul court ordered the company’s assets be liquidated in what must be the largest collapse in the container shipping industry in memory.
A closer examination of both these once highly valued companies, Toshiba and Hanjin, clearly illustrates that not all companies in Asia can be painted rosy. Despite the availability of strong management expertize throughout the region, many family controlled mega-companies still refuse to seek expert advice, instead choosing to allow family members and previous company executives to linger within the company and interfere with key decisions in strategy and operations.
Incredibly, Hanjin lost around US$14 billion in cargo stranded at sea during bankruptcy proceedings – hardly a case of good management and customer service. Again, this series of poor decisions will plague the company’s reputation and brand equity for years to come.
It’s been a bad year to be a giant Korean company. In February, Samsung group chief Jay Y Lee was arrested on suspicion of having made illegal payments of ¥43 billion (US$37.6 million) to an associate of the South Korean President. A month later, the company announced plans for expansion in the United States which was seen by many as a deliberate distraction to the negative publicity surrounding its leader being behind bars. Meanwhile, employees are left afraid and nervous – a fact not helped by last year’s mass recall of the Samsung Galaxy Note 7.
Despite the company maintaining its A+ credit rating, observers and analysts alike continue to ask the question: was it all necessary?
Perhaps many of these once distinguished and prestigious companies could bene t from a cultural enema and consider dismantling their Jurassic practices in favor of revitalizing the entire organization via some fresh thinking.
Please, enough of pathetic leadership and management!
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