Ben DiPietro, The Wall Street Journal’s Risk & Compliance Journal, June 19, 2017

We head to Asia for this week’s crisis, where Fujifilm Holdings announced losses from accounting irregularities in New Zealand were much larger than first thought and extended to the company’s Australian office-equipment unit. The announcement left some to wonder how much control the company has over its overseas units.

The company said it conducted a review and found the losses would widen further but did say it found “a problem” with controls at its Fuji Xerox subsidiary. Fujifilm said inappropriate accounting occurred in part because of commission and bonus “incentives” for managers and employees that “placed an emphasis on sales.” It said six board members at Fuji Xerox would resign to take responsibility for the losses that now total around $340 million. It also docked the pay of all Fuji Xerox board members and two other senior executives.

Using Fujifilm’s statements and those of its executives, the experts break down the company’s crisis management performance in this instance.

Davia Temin, chief executive, Temin and Co.: “Fujifilm’s public response to its ‘inappropriate accounting’ crisis was enough to be effective as witnessed by the fact the story lasted no more than a few days in the global news cycle. While the company’s public responses were terse, minimal and occasionally odd, they were unprecedented in their openness and disclosure. They came from President and Chief Operating Officer Kenji Sukeno, who accepted responsibility and announced sweeping changes in governance and operations of the company. The company released details of an independent review of the accounting debacle. All the findings and remedies appear to have been announced at the same time, with no more shoes to drop. The company spoke with its actions, with six board directors and more executives being held accountable and leaving or being sanctioned.

“Cross-cultural crisis communications are always difficult, especially between Asia and the U.S., as standards of public disclosure, responsibility, apology and reparation are very different. But they are also beginning to converge. In this most recent Fujifilm crisis, the company walked the line carefully and understatedly but spoke openly of the need for it to regain public trust. It also, in a rare display of public self-reflection and responsibility, at a news conference proffered a reason for its mistakes: ‘We showed too much respect for Fuji Xerox because it contributed to profits when Fujifilm was reforming itself after its film business peaked in 2000. We didn’t nag at Fuji Xerox very much, and that is something we now regret.’ I’ve never heard of ‘not nagging enough’ being offered as a reason for governance failures but the meaning is clear.

“In evaluating such a crisis response it is important to judge it not solely by U.S. and Western standards, or by Japanese standards, but by how the company fused the two in its communications. In this case, the company created a hybrid response that got the job done without catapulting it to major coverage. And that must be considered a major win.”

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