The rogue copper trades (the Hamanaka affair): disclosure over cover-up (1996)

Why one speculator was left in charge for so long

What this affair forced into the open was the question of why the company could not stop one trader’s off-book dealing for ten whole years. The skill to command the international copper trade brought the firm outsized profits, but it also created a domain whose judgments no one could verify. Dependence on a highly personal, high-return earner hollows out a company’s own checking machinery of its own accord. There is a paradox here: the more outstanding the earner, the more easily he is placed beyond control. That the loss took long years to grow is itself testimony to how long the watching eyes failed to reach.

What deserves notice in Sumitomo’s response is its stance after the accident had happened. It disclosed the loss rather than hiding it, cooperated fully with the US and UK authorities, and put the maintenance of international credit ahead of merely filling the hole. And it placed the axis of preventing a recurrence not only in building systems but in a culture in which the top keeps speaking of ethics. If what bred the wrongdoing was personal dependence, then overcoming it, too, rests in large part on human will — a conclusion with a certain persuasive force. The question of how an organization that leans on an outstanding individual keeps internal control still speaks directly to companies today.