The Scandal That Revealed a “Governance Blind Spot”
The Japan Post scandal, where a former supervisor allegedly inherited a pattern of collusion with vendors from their predecessor, is a wake-up call for SME owners. This is not just a big-company problem.
Even a massive organization like Japan Post couldn’t prevent misconduct at the individual level. No matter how many rules and manuals you put in place, corruption can seep through the cracks of human relationships—the “unspoken understandings” and “handovers from predecessors.”
The core of this issue isn’t “systems,” but “individual actions.” And a governance reform focused on this “individual” is now gaining attention in South Korea.
The Shockwave from South Korea: “Individuals Driving Corporate Governance Reform”
According to a report by the Nikkei, Lee Nam-woo, chairman of the Korea Corporate Governance Forum, points to a new trend where “individual investors are driving corporate governance reform” (source: Nikkei).
In South Korea, it’s not just institutional investors; individual investors are increasingly exercising their voting rights at shareholder meetings, demanding improvements from management. This is a bottom-up governance reform, completely different from the traditional “top-down” or “regulation-driven” approaches.
This concept is extremely important for SMEs. Even without the resources to build complex internal control systems like large corporations, you can dramatically improve governance quality by changing “individual actions.”
The Japan Post Case: A Failure of “Individual Governance”
Viewing the Japan Post scandal through the lens of “individual-driven governance reform” reveals the heart of the problem.
The fact that the former supervisor inherited collusion from their predecessor means the organization lacked a mechanism to monitor and correct “individual actions.” This is precisely a lack of “individual-centric governance.”
In SMEs, such “tacit handovers” happen daily. “Because that’s how the predecessor did it” or “it’s a long-standing custom” are reasons that allow misconduct and inefficiency to persist. This is a problem rooted in human behavior that no amount of rule-setting can solve.
Three Steps for SMEs to Implement “Individual-Centric” Governance Today
So, what concrete actions can you take? Based on the South Korean example and Japan’s current situation, here are three steps SME owners can start practicing today.
Step 1: Create a System to Visualize “Individual Opinions”
Like individual investors in South Korea, build an environment where “individuals” within your company can voice their opinions. Specifically, these measures are effective:
- Monthly “Governance Meetings”: Hold a meeting open to all employees, regardless of department or position, where they can freely express questions and suggestions for improvement regarding their work.
- Introduce an Anonymous Reporting System: A free tool (like Google Forms) is sufficient. Use it not just for reporting misconduct, but also to capture that “something feels wrong” intuition.
- Set Up a “Direct Line to Management”: Once a month, create a time slot for one-on-one conversations between the owner and employees. Even a short time can provide a valuable opportunity to hear the raw voices from the front lines.
The key is not to make these systems a mere formality. If management doesn’t listen sincerely and show a commitment to making improvements, it will actually damage employee trust.
Step 2: Re-evaluate “Predecessor Rules” from Scratch
As the Japan Post case shows, “customs inherited from a predecessor” are a major governance risk. SMEs, especially, cannot afford to ignore this risk.
A concrete action is to document all business processes as “handover documents” and introduce a system where the owner or a third party (e.g., an outside director or legal counsel) regularly reviews them.
The key is to question *why* a task is done in a particular way. Create a culture where “because that’s how the predecessor did it” is no longer an acceptable answer. This is the first step in individual-centric governance reform.
Step 3: Design Compensation that Clarifies “Individual Responsibility”
As the Korea Corporate Governance Forum points out, “incentives” are necessary for individuals to take action. Even in SMEs, introducing a compensation system that evaluates individual actions can enhance the effectiveness of governance.
- “Governance Contribution Points”: Award points to employees who contribute to preventing misconduct or improving operations, and reflect these in bonuses or salary increases.
- Formalize a “Whistleblower Protection Policy”: Clearly state that employees who report issues will not face disadvantages, and create a culture that actually values the act of reporting.
- Clarify “Scope of Responsibility”: Clearly define each person’s duties and responsibilities, visualizing “who decides what.” This reduces the “gray zones” where responsibility is ambiguous.
When Individuals Change, the Organization Changes
The Japan Post scandal shows that no matter how impressive a governance system you build, it’s meaningless if you don’t change “individual actions.”
The South Korean example teaches us that these very “individuals” can be the driving force behind governance reform. SMEs, in particular, should actively embrace this “individual-centric” approach.
You don’t need to introduce complex systems like a large corporation. Start by creating a “space to hear individual opinions,” questioning “predecessor rules,” and clarifying “individual responsibilities.”
Governance is not just about “defense”; it’s an “offensive” management strategy. An organization where individuals act proactively is one that is resilient to scandals and capable of sustainable growth.
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