New CEO at Kobayashi Pharmaceutical, outgoing chief to return 50% pay after red yeast rice scandal
Satoshi Yamane, currently the senior managing director and general manager of the sustainability management division, will succeed as CEO and president from August 8th.
Outgoing CEO and president Akihiro Kobayashi will remain with the company as the director in charge of compensation. Like Yamane, Kobayashi will begin his new role on the same day.
The announcement was made during the company’s extraordinary board of directors meeting on July 23rd.
The 64-year-old Yamane joined Kobayashi Pharmaceutical 41 years ago. He rose through the ranks and became the GM of the board of directors’ office and the growth strategy office in 2004.
However, as he was also involved in the firm’s failure to respond to the crisis promptly, he will be voluntarily giving up six months' worth, or 40 per cent of his salary received as senior managing director.
Kobayashi will also be voluntarily returning half of his monthly remuneration received between January and June 2024.
“President and CEO Akihiro Kobayashi was unable to demonstrate leadership in responding to the crisis, which resulted in the delay in reporting to the government and making the announcement. He bears grave responsibility for this and has therefore decided to resign from his position as president and CEO,” said a report from a fact verification committee formed to investigate the matter.
His father, Kazumasa Kobayashi, has also resigned from his role as chairman and representative director on July 23rd. He remains with the company as a special advisor.
“Representative director and chairman Kobayashi Kazumasa has already distanced himself from the business side of things and was not directly involved in responding to this incident.
“However, given the heavy responsibilities of his role as representative director and chairman, and the issue of the delay in reporting to the authorities on the extent of the damage after this incident was made public, the board of directors has determined that the chairman bears significant management responsibility,” said the report.
Both men are from the family which founded the company in 1886.
“Going forward, given that both of our representative directors have resigned from their positions as representative directors, and also because senior managing director Satoshi Yamane has the experience, knowledge and qualities necessary to oversee the entire company, we have selected him as representative director and president,” the report said.
According to the Ministry of Health, Labour and Welfare (MHLW), as of last Sunday (Jul 28), 2,283 individuals have received medical attention and 465 were hospitalised in relation to the case. Three hundred deaths were reported.
HK fund acquires shares
Aside from the leadership change, Hong Kong investment fund Oasis Management is reported to have acquired 5.2 per cent stake in Kobayashi Pharmaceutical.
Nikkei Asia reported that the firm spent about 8.7 billion yen (US$56bn) in acquiring over four million shares, based on a disclosure to Kanto Local Finance Bureau.
According to its website, Oasis Management was founded in 2002 and focuses on investments in Asia. Its offices are in Hong Kong, Tokyo, Texas, and the Cayman Islands.
Its other recent transaction was announced in February, where it revealed plans in selling 13.6 per cent of its stake in drugstore firm Tsuruha Holdings Inc to AEON, owner of another popular Japanese drugstore chain Welcia.
Fact verification committee: Delay in product recall
Kobayashi Pharmaceutical had failed to recall its products promptly, as it wanted to do so only after finding out the reasons behind the kidney diseases complaints.
This decision was based on the firm’s understanding that reports should be made to the authorities “only when causal relationship (between the products and adverse cases) is clear.”
A fact verification committee formed to investigate the matter highlighted the above during the extraordinary board of directors meeting.
According to the committee, a doctor reported a case of kidney disease on January 15 and another reported three cases on February 1 this year.
“Kobayashi Pharmaceutical had never received multiple serious case reports from doctors in such a short period of time, which made this case that much more serious.
“Despite this, with insufficient awareness of the crisis, the company did not immediately consider providing information to consumers and did not warn consumers despite advice from the doctor who had contacted them about the case,” said the report.
The report said that even if it was unclear whether the health damage was caused by red yeast rice-related products, the company should have recalled all products sooner, given the suspicion that the health complaints may have been caused by its products.
“However, based on the idea that reporting to the authorities and product recalls should be done at the same time, the company continued to investigate the scientific cause of the cases and did not promptly recall all products,” said the report.
The product recalls were only announced on March 22.
The report added that a crisis management headquarters should have been established and the president and representative director Kobayashi should have directly taken the lead in intensively managing the crisis.
While Kobayashi Pharmaceutical will implement preventive measures in the future, the committee urged that consumer safety as the utmost priority should be fully understood and embodied in the firm’s daily activities.
Otherwise, any preventive measures will be “nothing more than a pipe dream”, said the committee.
