Dentsu’s Complacency Said Behind Games Bid-Rigging Scandal

Dentsu Group Inc. has announced a third-party investigative panel’s report that ascribes the company’s indictment on bid-rigging charges to factors such as a low regard for corporate compliance, mainly on the side of management, and an organizational culture in which results were seen to justify any means.

Japan’s largest advertising agency was indicted on the charges under the Antimonopoly Law.

The report also criticized Dentsu’s presumption that the Olympic Games could not be successful without Dentsu.

The investigative panel of experts including lawyers, chaired by Masayuki Ikegami, a former superintending prosecutor at the Osaka High Public Prosecutors Office, submitted the report to Dentsu on Friday.

Six companies that won orders from the Tokyo Olympic and Paralympic organizing committee, including Dentsu, and seven individual people, including a former assistant head of Dentsu’s sports bureau, were indicted on charges of deciding in advance who would be the successful bidders for projects, such as those for operating Games events, that were ordered by the organizing committee. Some of the parties were indicted without arrest.

Dentsu is believed to have taken the lead in coordinating the receipt of orders in close cooperation with the organizing committee by seconding many of its employees to the organizing committee.

The report states that although Dentsu personnel who were seconded to the committee were involved in the process of selecting outsourcing contractors for test events, Dentsu failed to establish a system to manage the risk of conflicts of interest associated with such an arrangement. The panel therefore criticized Dentsu’s handling of information as extremely lax and said the company showed significant lack of consideration for fair and transparent procedures.

The report also points out that Dentsu’s past efforts to establish strong relationships of trust with clients got the firm to where it is today, but its stance of excessively emphasizing results led to a lack of consideration for trustworthy risk management.

Dentsu has been criticized in separate incidents as well, including the case of a female employee who was driven to suicide by the burden of an illegal amount of overtime work.

The panel stated that Dentsu regarded such issues as isolated cases and did not enhance awareness of compliance in general, which also became a factor for the bid-rigging case.

In addition, the panel said that an attitude was expressed within Dentsu that the company was the only entity that could make the Olympic Games successful, and such strong complacency weakened its ability to critically consider its own behavior.

Citing the need to enhance awareness of compliance to prevent a recurrence, the panel pointed out that the management needs to conduct company-wide compliance education.

The panel also asked Dentsu to take measures to manage the risks of conflicts of interest in situations such as seconding its personnel to the organizing committee, to strengthen the authority of its legal division and to improve training sessions for employees, among other steps.

On Friday, in response to the report, the Dentsu Group issued a comment that the company would take the proposals in the report seriously.

Since the bid-rigging case, Dentsu has been suspended from the bidding process for public service projects.