Resignations over the beni-koji supplement harm, and the governance reset (2024)

A change of governance forced by trust, not efficiency

What makes this decision unusual is that it was not a strategy about growth or efficiency: a failure of quality and of disclosure, bearing on consumers’ lives, was what brought roughly 140 years of founding-family management to a close. Holding niche markets with distinctive products, and having every employee submit ideas each month — that “Kobayashi-ness” had been the strength underpinning the company’s high margins. The same corporate character can be seen as the obverse, in governance and quality control, of concentration on the founding family and weak external discipline. It was an episode in which the weakness on the underside of the strength was exposed in the worst possible form.

Replacing the management in acceptance of responsibility, and bringing in an outside chairman, was a decisive move to change who holds governance. Yet the structure has not changed: the founding family holds about 30% of the shares, and the two principals remain inside the company. With activist shareholders pressing that this is “insufficient,” how far an outside perspective can be converted into real discipline is the task left to this company. What a firm that has relied on the centripetal force of its founding family puts at the core of its governance once it lets that force go — the question the beni-koji affair posed remains open even after the crisis has passed.