The missile-component export case and the directors’ liability (1991)

The technical pillar was also the control weakness

What this case exposed was not a weak part of the company but its strongest. The gyros and inertial navigation systems built up over twenty years from the 1961 technology licence commanded high prices and high technical requirements — they were the company’s calling card. They were also products that could not be handled at all except together with the heavy constraint of export control. Holding a technology and continuously controlling the routes by which that technology crosses borders are two different jobs. That the enforcement action fell on this product line rather than on a consumer part is where the fragility built into the business structure itself shows through.

The way responsibility was taken also carried this company’s particular circumstances. NEC, the largest shareholder, denied involvement while accepting moral responsibility and undertaking to stay in close contact and provide guidance — yet seven years later, in the Defense Agency procurement case, a president sent from NEC was indicted. The ambiguity of a relationship that spoke of independence while being tightly bound through personnel and sales can be read as having obscured where responsibility lay. That a shareholder derivative suit concluded the matter as the personal liability of individual directors was an event that drew a line through that ambiguity from outside.