Compliance: Is it a topic in Japan or Asia?


The interview this week is focused on not only Japan, but as well Asia. I am very happy to have an opportunity to talk to a Compliance and Ethics officer: Bernd Nürnberger. Since 1986 he has been working for TÜV Rheinland in Japan (a global provider of technical, safety and certification services, which was founded in 1872!). We talk about functional safety of goods and how much business ethics is really a topic in Asia/Japan.

Sibylle Ito: You are working as a Compliance and Ethics officer for Asia in Japan. I assume your involvement is strongly outside of Japan, or is this just an image?
Bernd Nürnberger: Well, first to give context, my involvement is not a service our company offers, it is an internal function, given independence from top management similar to statutory auditors 監査役, kansayaku. In 2006, when I assumed this position, our customers in Asia had helped us grow to more than 3000 employees in 13 countries. So, yes, my involvement and networking has been in the Asian region as well as in Japan. Much of it was on-site hands-on during phases of rapid expansion. For background, when I came to Japan in 1986 as a safety inspector for electric/electronic products, our customers in Asia had demand for 25 employees here and 3 in Taiwan.
Now, I use “customer demand” intentionally, because our business here is more customer-driven than in Germany, where much of our work for public safety is mandated by law. Hazardous facilities and products like steam boilers, elevators, and automobiles must be inspected by someone independent of the manufacturer before the government issues or renews an operation permit. Abroad, we serve different customers, many of whom want to sell their products to Europe or other global markets. It is easier if one of numerous neutral third party organizations has checked compliance with applicable health and safety requirements. This reduces risk of being forced into a product recall due to unexpected hazards. Our work is to check customer’s compliance with industry standards. Our own compliance is based on laws, accreditation standards, a comprehensive code of conduct and some 140 years of collective experience. Within this framework, it is customers requesting more and more services that fuels our growth and helps us invest in our people, information management systems, and laboratories.

SI: I hear about two movements in Japan: First the Galapagos effect with the focus solely on the local market and then secondly due to the need of company survival to go abroad. Do these movements have any effects on compliance and ethics?
BN: If we agree a major purpose of compliance and ethics is to maintain or improve a company’s survival and reputation, we might wish these issues were easier to grasp. I mean, we try to cover a vast area here. So we have customers, employees, society, and regulatory framework. We want to see where grey zones lie and what could be differences, here and abroad, right? It relates to risk management, and while the basic intention may be the same, the context is indeed different whether you try to satisfy requirements and expectations for a local / national market (which you know and appreciate) or you go international (where you trust partners to know and appreciate the market). Abroad, companies tackle barriers of language, culture, customer expectation and regulatory issues.
Let us look at an extreme example to get an idea where this may be going. A company action or failure to act leads to loss of life or health, impacting reputation, such as defective gas heaters or the elevator that killed a 16-year old in Tokyo in 2006.
For Japanese companies serving the Galapagos-effect market in Japan, it seems to depend on company culture, as influenced by top management behavior, whether its members feel compelled to take responsibility for a shameful event. This may range from top management publicly bowing to the floor in apology and compensating victims, all the way to nonchalant group denial because the issue fits into a “business risk as usual” drawer and is not seen as wrongdoing until a higher authority says so. In case of lawsuits it can take years.
For Japanese companies serving markets abroad, ethics, responsibility, as well as cultural fit-in, are the business of the partners, who may cover quite a spectrum, such as key customers, trading companies, or dependent subsidiaries. Sharing some of the basic values and product promises, these partners are immersed in a different rule-set and would be expected to first of all follow what is right in their culture. So it can be a kind of culture crunch right there. Partners who keep the open dialog going, will – that sounds trivial – understand each other better. During transition, a Management in Japan would want to know certain issues because for them these are ethics and compliance related. Yet, these issues may be inadvertently under- or over-reported. Helpful are shared vision and values, transparency, clear objectives, open incentives, job rotation, understandable corporate guidelines, such as a code of conduct, and social responsibility reporting.
The elevator case was the opposite situation, a foreign company collaborating with Japanese partners in the national (Galapagos) market. The way it was handled it was a reputation disaster. I mention this to highlight the need of companies to re-evaluate what compliance and ethics really mean for them in the context of a new market and culture.
Questions to ask in view of reputation and future business: What part of vision, values and management objectives shall remain universal and non-negotiable?

SI: From my personal professional experience it is rather hard to discuss in Japan business ethics. What is your experience?
BN: With customers, I do not remember having such discussions, but with colleagues. More often I talked about it with the foreigners than Japanese. With customers, I cannot imagine discussing business ethics, because it is about adopting values and living by them: Leading by example. Compliance is another issue, and let me explain to see what is different.
This is from the viewpoint of being in the compliance assessment business on the basis of national and international standards. For example, in safety testing, or in management system auditing, if there are findings of noncompliance it does not mean ethics is in question, at this level it is about conforming to requirements. If we point to the standard’s requirement that is violated you normally get agreement on the facts. We touch upon ethics if we dig a little deeper and raise awareness of possible consequences, but it is not a point of discussion. So, for compliance in a professional capacity we can speak softly, because we carry a stick in the form of the agreed-upon standards and the nonconformity reports. For ethics, we can give hints and discuss what we mean, but that is about it. So, what would be the point to discuss?
Earlier this year, I had the honor to present about ethics and sustainability to a small group in the Executive Hirameki meeting organized by Rob Pereyda for the LinkedIn group Business In Japan. I hear this is the largest professional social networking group of foreigners and Japanese in Japan. Phillip Rubel, Representative Director and CEO of Saatchi & Saatchi Fallon Tokyo presented enlightening case examples. Afterwards, in the open get-together with the participants, I found it easy to discuss business ethics and compare viewpoints, but of course these were participants with an interest in the topic.
The sentiment about business ethics was decidedly, “it depends”. Given enough detail of actual cases, my feeling is most people would use an intuitive approach along the lines of “I know it when I see it”, yet come to workable resolutions.

SI: Apart from your own company, which company do you admire in Asia and then in Japan for their approach on compliance and ethics? Why?
BN: Well, my sample would be biased by companies whose management and system I have audited in a professional capacity, and it would be partial because there are many that make honest efforts and report progress on compliance and ethics these and related issues such as corporate social responsibility. One telltale sign is how far a company supports openness and transparency by allowing independent third parties such as testing and assessment organizations or also NGOs a closer look into their products, processes, and organizational objectives. Does the company report on compliance highlights and lowlights, such as product recalls or fines for workplace violations, misleading marketing or environmental sins? Who endorsed the report? Do you trust that agency? Does the company go beyond what is mandatory – do they for example publish a sustainability report or donate significantly to charitable causes?
If readers wish to base any business or personal decisions on compliance or ethics, I recommend checking for how these aspects are addressed in annual reports, in other publications or in an aggregate of personal experiences with companies that many people share on the web. You can also find fine examples in Communications on Progress that members of the UN Global Compact are required to publish for review.

SI: In your function, where to you see the biggest challenges?
BN: Coming to think afresh what compliance and ethics mean – as an activity – they both work towards a common vision, better survival for persons and groups, but the ways are different. On the compliance side you can stipulate a scope and requirements, then verify a level of compliance against objective criteria. One universal challenge is to identify and know the many applicable laws and requirements. Once you have these requirements, compliance works like a test: Planned and done – or not. Pass/fail. Try that with ethics guidelines or a code of conduct.
If we want our organizations to survive better, ethics and compliance are tools to help analyze weak spots, establish guidelines and foster balance in a world of accelerating change. In the end it is about people, decision-making and what the people in power choose to adopt as their culture.

Let me close with a quote from Dan Beckham (Retrieved 2010-08-20 from http://www.beckhamco.com/26articles/107_powerofculture.doc.)

Culture can be changed. Too many leaders believe culture is chiseled in granite. This gives rise to a consistent lament, “We underperform because we don’t have a culture of performance.” Faced with this, leaders have two stances they can adopt: victim or builder. They can either throw up their hands and try to eke out an existence by working around cultural realities, or they can take the culture apart and put it back together.

I truly appreciate how much I could learn from Bernd about compliance and ethics in the professional environment. Thank you so much Bernd for opening my eyes that compliance is much more alive and flexible for suitable adjustments for the better of the society. So far I had understood it as a dry topic with rules cut in stone, which seemed far away from the concerns of the actual end user.

DISCLOSURE: Sibylle Ito and Bernd Nürnberger have no prior business relationship nor other sources of a potential conflict of interest. This interview was prepared by personal talk and conducted by e-mail. It is not intended to represent an employer’s views.

Brought to you by Sibylle Ito (シビル伊藤)

2 thoughts on “Compliance: Is it a topic in Japan or Asia?

  1. Thank you, Sibylle, for the inspiring interview. Being genuinely interested you bring out insights in more clarity.

    And thank you, Bridget in Japan, for your response. Appreciate it.

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