Recently, Japan’s Panasonic Group admitted a span of 44 years, a total of 93 cases of fraudulent activities, involving 5,200 models of products, the cumulative profit of 8.36 trillion yen (about 390 billion yuan). It is reported that this is the longest running corporate fraud case in the history of the global world.
The Real Situation of the Financial Scandal
According to multiple reports, Panasonic’s financial counterfeiting scandal is primarily related to misconduct involved with its subsidiary Panasonic Avionics Corporation (PAC).In 2018, the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) charged Panasonic and its subsidiaries with serious financial and compliance issues .
PAC was accused of engaging in bribery practices to secure millions of dollars in contracts. In negotiating these contracts, PAC secretly reached an agreement with an official of a state-owned airline to provide the official with high “consulting fees,” in effect transferring funds through the name of a third party in order to conceal the bribes. Ultimately, Panasonic paid a $280 million settlement to end the lawsuit.
In addition, PAC had problems with revenue misreporting. in 2012, in order to inflate earnings, PAC boosted its quarterly financial data by backdating contracts and misreporting profits, misleading investors and regulators. As a result, vulnerabilities in Panasonic’s financial data and control systems were exposed, causing significant financial and reputational damage to the company.
Panasonic advocates that participation in counterfeiting means you are loyal to the company, the company supports you for life, and at the end of the year there are large bonuses and stable promotion opportunities. Under this management model, Panasonic finally created a well-organized, professional and efficient, a glory, a loss of all the staff involved in the counterfeiting team, so much so that it was able to 44 years as one day, working overtime until the early hours of the morning every day, and desperately put into the market 5,200 products that were counterfeited.
According to NHK, Panasonic had tampered with internal data and raised the semiconductor moisture-proof value to comply with U.S. standards in order to get U.S. certification for a certain product. As a result, the product continued to receive complaints of malfunctioning controls after it went on sale. In its investigation report, Panasonic put all the blame on consumers for improper use. At the same time, in order to emphasize the spirit of craftsmanship, Panasonic officials also hypocritically said that free repair and free return, and ruthlessly brushed another wave of public favor.
The Reason Why the Incident was Exposed
Panasonic can hide for 44 years, and how to reveal? There is only one answer, and that is infighting.
With the rise of global home appliance manufacturing to high quality, Panasonic felt great pressure. In the strong market competition, Panasonic had to rely on selling factories, downsizing business barely maintain profitability. Less revenue for the company meant lower wages and lower benefits for employees. In the case of disorganization, infighting emerged.
It is reported that in these two years, Panasonic’s new employees are dissatisfied with the company’s internal management, to the Japanese authorities to report the company is suspected of a number of product counterfeiting, fraudulent quality certification. But at the time in the eyes of the chairman of the board of directors, is only a “small fight”, said that “only a very few products have defects”. However, the company’s top management ignored the power of the people, and as time went on, more and more employees came forward, reflecting that the company did have a systematic phenomenon of counterfeiting.
Coupled with the fact that the Panasonic team had tampered with internal data to get a certain product certified in the U.S., the semiconductor moisture resistance values were raised to comply with U.S. standards. As a result, after the product went on sale, it continued to receive complaints of malfunctioning controls, and things got bigger and bigger.
Eventually, under pressure, Panasonic Holdings President Yuki Kusumi and Panasonic Industrial President Shinji Sakamoto issued a press release on November 1, bowing 90° to reporters and cameras.
Solutions
The Matsushita Group proposed a series of solutions, including the return of 50% of monthly salary for the next four months as a punishment. To prevent this from happening again, Shinji Sakamoto emphasized that “the lack of understanding of quality assurance is deeply rooted, and management needs to show a strong determination to root out fraud. The plant will invest about 5 billion yen over three years in anti-cheating measures, such as automated test equipment to reduce the scope for human intervention.”
He added: “I apologize for the concern and inconvenience this has caused, the biggest factor being laxity on the part of management and a lack of understanding on the part of employees.”
The incident has not only dealt a serious blow to the Panasonic Group’s reputation, but has also called into question the image of “craftsmanship” in Japanese manufacturing and industry. The falsification behavior of the Panasonic Group and its subsequent handling of the case have triggered a deep reflection on corporate ethics and regulation around the world.
