Dentsu’s culture of winning at any cost was at least partly to blame for the global advertising group facing criminal action in Japan for alleged Olympic contract bid rigging, according to an internal review.
The investigation found that widespread thinking that results justify everything was a factor behind dentsu, and an employee, being indicted for alleged corruption linked to the Tokyo Olympic and Paralympic Games in 2021.
The “organisational culture in which accomplishing results and objectives was so emphasised that there was a lack of consideration for such risks, which may have led to dentsu having an excessive ‘client first’ bias,” according to a review by three independent outside directors.
An employee of dentsu’s domestic subsidiary in February had a criminal complaint filed against him for an alleged violation of the Antimonopoly Act in connection to the bidding for the test events of the Tokyo Olympic and Paralympic Games.
This follows former dentsu executive Haruyuki Takahashi, and now a former member of the Tokyo Olympics board, being arrested last year on charges alleging bribes from sponsors.
Five senior executives at dentsu's Japan business returned their salaries for up to six months.
Dentsu’s latest financial results reflect significant changes and restructuring.
The company reported negative organic growth and weaker profits for the March quarter as its business in the US and Asia went on a slide. The group is now forecasting organic growth of 1%-2% for the full year, down from 4% previously.
Dentsu last year announced a new global management structure, integrating international and the local Japan business.
This followed a major restructure, confirming the departure of Wendy Clark as CEO of the international division, in a move called "One Management Team" and now One Dentsu.
The latest dentsu review, following the corruption allegations, found several failure points, including a lack of consideration for fairness and transparency of procedures, inadequate awareness of compliance risks and an issue with culture.
“Dentsu has built its current position in the advertising industry by becoming close with its clients, identifying their true intentions that the clients themselves are not aware of, continuing to deliver results that exceed their expectations, and building strong relationships of trust with clients,” the review report said.
“While this proactive attitude toward work has become a source of dentsu's competitiveness, it also tends to cause dentsu into thinking that the results justify everything, and it may also cause employees to have tunnel vision or become short-sighted at work.”
Among the recommendations is reform of compliance awareness, strengthening risk management, revision of the personnel system with an awareness of incentives.
Dentsu has established a Japan Reform Committee headed by CEO Hiroshi Igarashi.
“Dentsu is promoting Mindset and Behavior Reform in the Japan region that will renew the way we approach our work,” says Igarashi.
“The purpose of these efforts is to enable us to evolve into a company that is valuable not only to our clients, but also to our employees, society, shareholders, and all other stakeholders in accordance with an ever-changing society that is significantly influencing the rules of competition in business.
“I must admit that our approach to work had led to an insufficient awareness of the appropriateness of the methods used due to an excessive focus on achieving our goals.
“This has resulted in a lack of knowledge and awareness of compliance with laws and regulations, which must take precedence over the achievement of objectives, in addition to insufficient business processes to ensure fair transactions.
“I also believe that internal checks and monitoring functions to prevent non-compliance were inadequate.
“In order for dentsu to continue to ensure its contributions to society, I believe it is essential to construct a new approach to our work by raising our awareness of our social responsibilities and improving transparency, as well as clarifying the rules and processes that we must follow.
“The Mindset and Behavior Reform is intended to define and implement a new approach to work that addresses these challenges. With resolute commitment, I will work together with management and employees to implement this reform.”
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