The boardroom fight over responsibility for the land-fraud loss, and the change of chairman and president (2018)

Institutional design, and whether it functions

What this affair raises is less the fraud itself than the shape of the governance the fraud exposed afterwards. The chairman, with no trace of involvement in the transaction, stepped down; the president, who had been first to put his seal on the approval document, was promoted to chairman and leads the present structure — an inversion in which the one bearing the heavier responsibility remained and the lighter one left, played out inside the board itself. The investigation report, commissioned precisely to bring outside eyes to bear, was sealed because of that third-party character and placed beyond the reach of shareholders. That an institution can be well designed and still not function is written plainly here.

The shareholders’ meeting did, however, re-elect the incumbent management. One may read that as strong results outweighing doubts about governance. But most of the loss remains unrecovered, and the attribution of responsibility that the report framed as “heavier the higher one sits” was left without ever taking a definite form. How far a company can describe its own failure in its own words once the crisis has passed — the land-fraud affair seems to have left Sekisui House with that question, weightier than the size of the loss.