(Jan 28): Nidec Corp delayed the release of its quarterly results and pledged to overhaul the company’s growth-at-all-costs culture in the wake of an accounting scandal that’s seen its debt rating cut to junk and put it at risk of delisting.
The company said on Wednesday it hasn’t determined when it will release third-quarter (3Q) results and it’s also unclear if past accounts will need to be corrected. A third-party probe into accounting irregularities is ongoing, with preliminary results expected to be submitted around the end of February, and a final calculation on the monetary impact of the crisis to follow, Nidec said.
Nidec has been embroiled in scandal for months after a growing number of suspected cases of improper accounting came to light, triggering filing delays, credit downgrades and the risk of a delisting in Tokyo. The company’s founder Shigenobu Nagamori has already stepped down as chairman of the board, with an intense focus on performance — which fuelled Nidec’s ascent to become the world’s largest manufacturer of precision motors — blamed for the crisis.
Details of that pressure-cooker culture were revealed in an almost 80-page document also released on Wednesday and submitted to the Tokyo Stock Exchange to address their concerns about Nidec’s management.
The importance placed on short-term profit and an intolerance for missed targets created a climate in which employees felt unable to speak out, Nidec said. One unidentified worker said Nagamori placed too much emphasis on maintaining or increasing Nidec’s stock price and market capitalisation, while some managers wanted multiple meetings a day to check whether targets were being met.
Employees who missed targets were given excessively strict guidance in front of colleagues, while a lack of resources meant investigations related to compliance violations were sometimes delayed or insufficient.
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“We recognised that these issues are not isolated incidents but are vital themes across the entire Nidec Group,” the company said. It’s creating a new organisation to lead its cultural overhaul and will “ensure that employee voices are reflected in our actions, building a corporate culture where everyone feels empowered to drive change through open dialog”, it said.
The scandal, first revealed in June, saw chief executive officer Mitsuya Kishida replace Nagamori on the board late last year.
“I have great respect for Nagamori for building this company, but this isn’t about one person,” Kishida told reporters on Wednesday after offering a public apology by bowing his head. “Running the company under intense pressure was the cause, and we understand short-term gains were put before long-term investments.”
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Nidec has disclosed accounting issues that have spanned subsidiaries in Italy, Switzerland and China, as well as its car inverter business.
The cases have bogged down auditors’ assessment of the company’s finances, delaying submission of its financial reports. The crisis has also seen the Tokyo Stock Exchange warn that it may delist Nidec if the company can’t show that it’s improved its internal management system. The stock has already been removed from the benchmark Nikkei 225 index.
Turbulence has continued into the new year, with Moody’s Ratings downgrading the company’s debt three levels to junk. The outlook is negative and the rating could be under further pressure depending on the findings of the investigation into potential accounting irregularities, the agency said.
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