The True Nature of “Unofficial” Risks in Politics and Business

The Political Governance Issue Reflecting Corporate Challenges

In November 2024, the Liberal Democratic Party’s Governance Committee issued a proposal calling for a review of the “unofficial candidate designation” process for elections. According to NHK reports, the committee announced a policy of “not accepting organizational requests regarding personnel matters” and called for clearer criteria for designating specific candidates as unofficial (Source: NHK News, “LDP Governance Committee Proposes Not Accepting Organizational Personnel Requests,” November 2024). The Nikkei also reported similarly, “LDP Governance Committee Proposes Eliminating Unofficial Candidate Designations in Elections.”

At first glance, this appears to be an internal party matter. However, the structure of this issue directly applies to HR and evaluation systems in small and medium-sized enterprises (SMEs). When “organizational requests” cause specific individuals to suffer disadvantages, it mirrors the typical governance failures occurring daily in SMEs.

This article analyzes this political scandal from an “HR governance” perspective and offers concrete measures that SME managers can apply to their own companies.

The True Nature of “Unofficial” Risk: Arbitrariness in HR

The LDP’s unofficial designation is a decision by the party executive to not officially endorse a specific candidate. The problem lies in the lack of transparency in the criteria, with potential influence from internal faction dynamics and personal interests.

Let’s translate this to an SME context. Has an employee in your company ever been suddenly removed from a key project or excluded from promotion consideration? Was that decision based on objective evaluation criteria? Or was it influenced by “the boss’s mood” or “a specific executive’s preferences”?

In many SMEs, performance evaluations are subjective and lack written criteria. This mirrors the LDP’s “unofficial” problem exactly. Organizational requests—meaning someone’s “deference” or “pressure”—distort what should be a fair HR process.

This state is not merely unfair. It leads to the loss of top talent, the spread of internal distrust, and, in the worst case, becomes a breeding ground for compliance violations. For example, if only the boss’s favorite employees are promoted, and their misconduct is overlooked, governance fails.

The Lesson from Mitsui Sumitomo Insurance: Practical Governance Strengthening

News about Mitsui Sumitomo Insurance reported around the same time is also important in this context. The company’s president pledged to “strengthen governance after the merger” and prevent recurrence (Mainichi Shimbun, November 2024). Even for large corporations, strengthening governance is an ongoing challenge, and the transparency of HR systems is particularly scrutinized after organizational integration.

In SMEs, HR evaluation criteria can become confused after business succession or M&A. When the founder hands over to a successor, a gap often emerges between “the old evaluation method” and “the new criteria,” leading to employee dissatisfaction. The Mitsui Sumitomo Insurance case shows that periods of organizational change are precisely the best opportunity to redesign HR governance.

HR Governance Reforms SMEs Can Implement Now

So, how should SME managers prepare for this “unofficial risk”? We propose the following three actions.

Making Evaluation Criteria “Visible” and “Rule-Based”

First, clearly document your HR evaluation criteria. Don’t just focus on “achievement of sales targets.” Set multiple axes, such as process evaluation (behavior and attitude), team contribution, and customer satisfaction. The key is to create a system where evaluators cannot arbitrarily add or deduct points.

Specifically, standardize evaluation forms and include a section for the evaluator (supervisor) to write comments. Furthermore, provide feedback on the evaluation results to the evaluated employee and establish an appeals process. This alone significantly reduces the room for organizational requests to interfere.

Eliminating “Organizational Personnel Requests”

As the LDP Governance Committee’s proposal suggests, explicitly state a rule of “not accepting organizational requests regarding personnel matters.” This prohibits executives and department heads from interfering by saying, “Promote that employee” or “Transfer this employee.”

In SMEs, it’s not uncommon for the president or executives to directly intervene in HR matters. To prevent this, centralize the HR evaluation process within the “HR department (or administrative division)” and establish a rule that management’s role is strictly limited to “approval.” For example, decisions on promotions and transfers should go through a review by an HR committee (composed of the president, HR director, external members, etc.).

Introducing “Third-Party Evaluation” with an External Perspective

For SMEs, utilizing external experts is an effective way to ensure objectivity in HR evaluations. For instance, you could have an external HR consultant audit the evaluation process once a year, or introduce a 360-degree evaluation system (where supervisors, peers, and subordinates evaluate each other).

Additionally, more companies are now offering “recruitment compliance training” (Jiji Press, November 2024). By applying similar training not only to the recruitment process but also to internal promotions and evaluations, you can ensure fairness.

The Essence of Governance Design to Prevent “Unofficial” Actions

The important point here is that these measures are not about “increasing rules.” Following editorial policy, governance is not about “not violating rules,” but about a “high-level design concept to achieve business objectives.”

The purpose of HR governance is to boost employee motivation and drive company growth. Ensuring transparency and fairness in evaluations is the core of this. Rather than binding people with rules, designing a system that all employees can accept is what ultimately eliminates “unofficial risk.”

For example, one SME visualizes employee evaluations along two axes: “results (sales)” and “behavior (internal compliance adherence),” and makes the results public to all employees. This reportedly reduces questions like “Why was that person promoted?” and significantly decreases internal dissatisfaction.

Summary: Is Your Company Creating “Unofficial” Situations?

The LDP’s governance issue is not a distant political story. The same structural problems may be lurking within your company’s HR evaluation system.

If promotions are decided by “the boss’s say-so” or only “favorites of specific executives” are evaluated, top talent will leave, and the morale of remaining employees will decline. As a result, company growth will stall, and governance will become a mere formality.

Review your company’s HR evaluation system now. Are the evaluation criteria clear? Is there room for organizational requests to interfere? Do you have mechanisms to incorporate external perspectives?

Addressing these three questions is the first step to protecting your company from “unofficial risk.” Governance is not just for large corporations. Precisely because you are an SME, you should introduce simple, practical systems to achieve sustainable growth.