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Jail CEOs of firms that make deadly products
By John Gong |
April 19, 2011, Tuesday
|
Print Edition
Print Edition
IN corporate history, CEOs of rogue companies did go to jail.
One case in the automobile industry happened in Japan several years ago. In 2004, Mitsubishi Motors Corp started to concede that its cars had fatal design defects amid mounting reports of accidents related to its vehicles.
By 2004, the controversy had snowballed to what was referred to as "one of the largest corporate scandals in Japanese history," as its CEO Katsuhiko Kawasoe admitted many more defects going back as far as 1977.
In fact, the top brass at the Mitsubishi Motors knew of these defects all along, and had been engaged in a systematic cover-up. Kawasoe stepped down and was subsequently convicted by a court in Tokyo with a three-year sentence.
A few weeks ago, CCTV reported that the South Korean tire company Kumho used excessive amounts of reworked rubber as raw materials in its plant in Tianjin City. This corner-cutting practice has resulted in many reports of tire rupturing, and some have caused car accidents. Bad tires certainly kill.
Reports of Kumho tire problems surfaced on the Internet at least two years ago. But repeated customer appeals were ignored with utter arrogance. Did the company's China CEO Mr Lee Han-Seop know about this problem two years ago?
Why does it take so long for the company to take actions, waiting until problems were reported by the CCTV? Has the company been engaged in a systematic cover-up since the first report of its defective tires?
These are legitimate questions warranting a full scale investigation by criminal prosecutors in Tianjin. If there is indeed evidence beyond reasonable doubt that the Kumho management in China knew about this problem years ago, and have been ignoring this and engaging in a cover-up, I think someone should go to jail, and a huge fine should be levied against Kumho for punitive damages.
Adding an ounce more reworked rubber is, in essence, no different from adding an ounce of melamine to milk, as both cases risk people's lives.
Let's face the fact: China is still a developing country with its market economy still full of loopholes in product quality and product safety regulations.
In this environment, one would expect a large multinational company to serve as a shining example of long-term brand reputation and customer loyalty through product quality and business honesty.
Sadly, between adhering to principles and making fast bucks, Kumho chose the latter.
Mr Lee Han-Seop has since appeared on TV with a signature deep bow as a gesture of apology. Kumho has offered to exchange all defective tires. I say, it is too little, too late.
One of the reasons why product quality and safety in China is such a rampant issue is precisely because the cost of committing wrong is too small. Here we need to take a page from American justice in where a rogue company is held accountable. Its CEO goes to jail, and the company coughs up a huge fine for punitive damages.
During the recent national legislative sessions, Mr Wang Lijun, the public safety bureau chief in Chongqing, proposed that those responsible for bad products endangering peoples' lives should be charged with involuntary manslaughter.
I am all for it. After all, we are talking about deeds by corporate executives who may know that their decisions may possibly lead to loss of human lives.
(The author is associate professor of economics at the Beijing-based University of International Business and Economics. E-mail: johngong@gmail.com. The views are his own.)
One case in the automobile industry happened in Japan several years ago. In 2004, Mitsubishi Motors Corp started to concede that its cars had fatal design defects amid mounting reports of accidents related to its vehicles.
By 2004, the controversy had snowballed to what was referred to as "one of the largest corporate scandals in Japanese history," as its CEO Katsuhiko Kawasoe admitted many more defects going back as far as 1977.
In fact, the top brass at the Mitsubishi Motors knew of these defects all along, and had been engaged in a systematic cover-up. Kawasoe stepped down and was subsequently convicted by a court in Tokyo with a three-year sentence.
A few weeks ago, CCTV reported that the South Korean tire company Kumho used excessive amounts of reworked rubber as raw materials in its plant in Tianjin City. This corner-cutting practice has resulted in many reports of tire rupturing, and some have caused car accidents. Bad tires certainly kill.
Reports of Kumho tire problems surfaced on the Internet at least two years ago. But repeated customer appeals were ignored with utter arrogance. Did the company's China CEO Mr Lee Han-Seop know about this problem two years ago?
Why does it take so long for the company to take actions, waiting until problems were reported by the CCTV? Has the company been engaged in a systematic cover-up since the first report of its defective tires?
These are legitimate questions warranting a full scale investigation by criminal prosecutors in Tianjin. If there is indeed evidence beyond reasonable doubt that the Kumho management in China knew about this problem years ago, and have been ignoring this and engaging in a cover-up, I think someone should go to jail, and a huge fine should be levied against Kumho for punitive damages.
Adding an ounce more reworked rubber is, in essence, no different from adding an ounce of melamine to milk, as both cases risk people's lives.
Let's face the fact: China is still a developing country with its market economy still full of loopholes in product quality and product safety regulations.
In this environment, one would expect a large multinational company to serve as a shining example of long-term brand reputation and customer loyalty through product quality and business honesty.
Sadly, between adhering to principles and making fast bucks, Kumho chose the latter.
Mr Lee Han-Seop has since appeared on TV with a signature deep bow as a gesture of apology. Kumho has offered to exchange all defective tires. I say, it is too little, too late.
One of the reasons why product quality and safety in China is such a rampant issue is precisely because the cost of committing wrong is too small. Here we need to take a page from American justice in where a rogue company is held accountable. Its CEO goes to jail, and the company coughs up a huge fine for punitive damages.
During the recent national legislative sessions, Mr Wang Lijun, the public safety bureau chief in Chongqing, proposed that those responsible for bad products endangering peoples' lives should be charged with involuntary manslaughter.
I am all for it. After all, we are talking about deeds by corporate executives who may know that their decisions may possibly lead to loss of human lives.
(The author is associate professor of economics at the Beijing-based University of International Business and Economics. E-mail: johngong@gmail.com. The views are his own.)
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