Nippon Meat Packers' Effort to Compliance

Nippon Meat Packers Toshimichi Miyachi

1. Scam of disguising imported beef as domestic by Nippon Meat Packers

Abstract of the Event
Scam of disguising imported beef as domestic by Nippon Meat Packers was detected in Aug, 2002. The scam was planned by the general managers of the 3 branches.
Nippon Meat Packers had more than 10% rate of growth, but the sales decreased after the detection. 4 years passed until we had the same growth rates again.
WE Nippon Meat Packers began a reform of compliance after the event.

• the 2nd top among the food companies
• Sales: 960,000,000,000JPY per a year
• Staff: 28,000(2006.9)
• Products: meat, ham, sausage, fish products, daily products, vegetables, freeze dried food, sports, etc.
• Nippon Meat Packers Group has 821 branches.(sales branchs:422, shops:185, factories:185, etc).
• All of the 3 misconduct incidents happened in the sales branches. Each sales branch has its own building with a chief and around 20 staff. The quality of each branch depends on the quality of the chief, information within each branch goes to the chief and stops there. Employees worked for long periods within each branch with few transfers. They had severe competition between the branches.

2. Preventative Measures

Firstly we set up the committee for business ethics. Most of the committee member were people from outside the company (the head of the committee was Prof. Taka). Then, the committee for business ethics set up an investigation committee for reform which consisted of 3 members from outside the company. The investigation committee concluded that our Nippon Meat Packers had 3 main problems. The committee for business ethics proposed 10 reform items, and Nippon Meat Packers began to reform according to the proposal(The reports and proposal by the committees are shown in the web site:
http://www.nipponham.co.jp/news/2003/0314/files/file02.pdf)

2-1. Code of Conduct

We established a new code of conduct. The process of making the code will be shown in the following. The committee of business ethics proposed that we hold a meeting with representatives of each company section, ages 30-45. The representatives held workshops to establish the code. First, Prof. Taka explained the direction of the reform. Second, he told them to write the lists of the cases of violation of law or ethics code they experienced or accident cases. At the beginning of workshop, few cases were written, but finally more than 400 cases were written. They established the code of conduct by analyzing those cases.

2-2. Dissemination of the Code

We familiarized employees with the code of conduct.

2-3. Activities for Complete Overhaul

We overhauled our business activities completely: 1)product labels, 2)laws, notification, application, 3) drivers licenses (our company has about 6000 trucks), 4)management of overtime work.
1) Product labels
We made an electric database of products in order to provide correct labels.
2) Laws, notification, application
We found cases in which there was a tendency to forget to notify the new fire warden when the old warden moved to a different section.
3) Drivers Licenses
We provided instruction in avoiding drive after drinking.
4) Management of overtime work
We did away with overtime work without pay. Most employees had worked overtime without pay in order to provide extra service to their clients.

2-4. Establishment of Information Pipeline

We established an information pipeline. We established a division of business ethics as a consulting window inside the company and a law firm other than the advisor of Nippon Meat Packers as a window outside the company. We chose a female consultant because we thought female consultants are easy to consult. And we established a code of information management for companies attached to Nippon Meat Packers Group, and ordered that they report all unusual things and consult with the division of business ethics when they cannot make a decision. Unusual things include fire, uncollectible debt, product failure, and so on.

2-5. NTProject

NT Project is an internal control project. We adopted a bottom up approach for our internal control rather than a top down one. Each branch should establish each internal control system and address it.

2-6. Compliance System

3 elements are important for compliance: top commitment, dissimilation to all employees, monitoring.
We set up the committee for compliance promotion and the compliance leaders. All information on compliance is gathered in the division of business ethics. The division of business ethics sends the important information it receives by 6:00pm to the 100 auditing office by 8:00pm. The division makes a summary of a problem and the response and result and distributes it in the board meeting once a month. The summary has from 20 to 30 pages. The division explains the important parts to the board members orally.
We have a code of public release that we release information on a case of law-breaking, harm to customers, items related to public funds, and so on.

3. Data

The incident rate of occupational injuries of Nippon Meat Packers decreased in 2002 once, but began to increase rapidly after 2003. The rate is twice as high as the total rate of food industries in Japan. And the number of discharged actions increased, too.
What does this mean? I think the real number of incidents did not change, but the incidents were not reported correctly in the past.
In order to improve the high rate, we began to analyze the cause of injuries and take countermeasures in one factory as a model case. To gather accurate information is a key factor in decision making in business.

4. Questionnaires

In the first and second evaluation surveys, the questions were just “Did you keep the rules or not"? But that was not sufficient information to improve the situation.
From the third evaluation survey, we improved the questionnaires. We made questionnaires to find the correlation between questions. For example, to what kind of questions do those who break compliance answer yes? We explored the factors that have a strong relation to breaking compliance.
We found some factors that relate to lower law complinace: lenient punishment, on-site handling, a low penetration of a brand, unconvincing punishment, etc.
On the other hand, the factors below will raise compliance:

1. Good relationship to one's boss
2. Satisfaction in one's work
3. High self-esteem

5. More high compliance, more competitive powers

Some worried that reducing uncompensated overtime will cause business difficulties, but it contributed our business. We could reduce the number of car accidents and as a consequence the cost is reduced and we can save on auto insurance fee. And the working motivation of employees became higher than before because they were able to go home and spend time with their families.
Then we began to reveal negative information to prevent the further misconduct; however, it is difficult for the old type of staff to adjust themselves to the new policies.

6. Risk Management

6-1. The Important Points for Risk Management

The Important Points for Risk Management in our company are as follows:

1. having no secrets in our company
2. controlling and sharing the negative information, and make the best use of it for prevention
3. recognize that to err is human and formulate actions accordingly
4. to clarify the objectives and expected results for the measures of compliance

1. commitment from the top
2. sharing the negative information
3. sharing of data
4. Voluntary compliance
5. sense of ownership of compliance

6-2. Our policy for Informed Consent

Today, the investment standard for laws is becoming higher. We should adjust ourselves to this change of standard.

Q&A:

1) Professions
Q:How many professions who have national certification such as lawyers and accountants are working in Nippon Meat Packers? What decision making should be prioritized, ASEC or the management team?
A: Lawyers and accountants work only in the oversea branch. Not many professionals are working in our Japanese company. Some people who have HACCP or ISO certification are working in our factories, but I don't know the number now. I can not imagine a case that those professionals and the management team have different opinions

2) How to measure the level of compliance
Q: You said that your company's vision is that Nippon Meat Packers will be the most reliable company in Japan. How will you measure the reliability?
A: This is the vision for the company staff, so we don't plan to compare the reliability to that of other companies.
Q:I think to measure is important. How about counting the number of misconducts?
A: The number of disciplinary action increased this year. The number of consultations is also increasing. The number of consulting shows how well the consulting desk is functioning.

3) How to share the negative information
Q: It is difficult for employees to disclose their own faults or misconduct. You said that few cases were written at the beginning of the workshop to discuss the code of ethics but finally more than 400 cases were written. It is surprising! How long does it take for them to write 400 cards? Why did they succeed in making these disclosures?
A: It is thanks to the lead by Prof. Taka. His attitude was very hearty. And also, the 1.5 month after the exposure of the misconduct were such a hard time. It made the staff serious about the workshop.

4) Unpaid overtime work
Q:How did you succeed to eliminate unpaid overtime work? To pay for overtime work seems to be a burden to the business.
A:We acted on the policy to keep compliance for all aspects. Time management was no exception. We tried to conquer the old custom in our field.

5) Correspond to the old generation
Q: How do you guide the old types of managers who cannot make profits with keeping rules?
A:We are conducting training in communication for them. We teach that to share the negative information is important in order to raise consciousness.

6) The Victory of Nippon Ham Fighters(the baseball team)
Q: Your company seems to have good top commitment. Was the victory of Nippon Ham Fighters a good experience?
A: Yes, it was a really happy news for us!!

7) Education system of Business Ethics Q: What education system of business ethics do you have in each office?
A: We spend 2 hours after the office hour. We sometimes have presentation contests. We developed measures for sexual harassment and power harassment with individuals from outside of our company.

8) How many companies do you have within the Nippon Meat Packers Group?
Q: How many companies do you have within the Nippon Meat Packers Group including companies Nippon Meat Packers does not have interest in?
A: 113 companies including holding companies.

11) Handbook for the Code of Conduct
Q:Is the Handbook for the Code of Conduct a help to employees?
A: We read it every morning together and have teaching time in our seminars.
Q: How do you think we should make the best of the Handbook?
A: We are trying to involve as many people as possible to make the code of ethics. We expect that it will raise the sense of ownership. And we add an explanation of how the ethics code was violated through sharing the negative information.

12) How to raise the motivation of employees compliance?
Q: How do you raise and keep the motivation of employees for compliance?
A: we made a policy that we would have top-down activities for the first 3 years and bottom-up activities for the last 3 years. In these 3 years, we are trying to have the bottom-up activities that emphasize the sense of ownership. We are trying to have positive compliance activities rather than negative ones.
The problem is how we can convey the importance of compliance to the generation who did not experience the misconduct of our companies. Every August is compliance month, and also we would like to keep it mind during the other 11 months. Some offices keep a very high level of compliance; they are trying to improve compliance by accepting children's visits to their office.

14) Questionnaires to the employees
Q: Did you finish questionnaires 4 times? When was the 1st time?
A: It was in the fall of 2003, soon after the disclosure of the misconducts.
Q: Have the results of questionnaires have been changing according to the progress of compliance activities?
A: As an example, the number of sexual harassment decreased after the measures.

15) Human Resource Allocation
Q: Is there anything that changed before and after the misconducts? (ex. the shift of the head of office)
A: We began to promote shifts. We changed the top of the Nippon Meat Packers Group when the misconduct was disclosed. We have human resource exchange among the divisions. We began to introduce a system that they check misconducts by forcing the manager to be absent from the work for one week. This system is used in banks. We introduced these compliance aspects for the evaluation of offices.

16) Bad practice
Q: What objectives do you have in reducing the number of bad behaviors?
A: We appraised the increase of the number of bad practice for the first phase. Then we aim for the number of incidents at work to become zero. We don't have the objectives for the number of bad practices.

17) The effects of demise of unpaid overtime work
Q: Do you have other effects from demise of unpaid overtime work other than the decreased number of traffic accidents?
A: Some contract employees complain that their salary became so small that their life became poor.