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Japanese PR Giant Kyodo Names New President Amid Financial Scandal

Asia Pacific, Global

Arun Sudhaman 10 Jan 2012

TOKYO--Kyodo Public Relations, the largest pure-play PR firm in Japan, has named new leadership following the dramatic departure of founder Sakae Ohashi due to financial irregularities.

Almost 50 years after founding Kyodo, Ohashi left the firm in late December, when an internal report found that he had allegedly embezzled money from the agency to repay personal loans. Two other board members have also left Kyodo, which has around 250 staffers and reported billings of $56m in 2010, placing it 25th in the Holmes Report’s Global Rankings.

Ohashi has since been replaced by Kyodo veteran Akira Yamada, who has taken on the roles of president and CEO.

The news has stunned many in Japan’s PR sector, because of Kyodo’s heavyweight status in the market and Ohashi’s long tenure in the profession. The firm first became aware of the issue thanks to an internal whistleblower, and has since established a third party investigation committee consisting of two lawyers and two public accountants.

“We sincerely apologize to all the related parties including shareholders, clients and all stakeholders regarding the incident in our agency reported by mass media,” said Yamada in a statement to clients. “We sincerely accept responsibility, and commit to establish a new corporate structure to recover our credibility from all stakeholders and realize a management system focusing on effective compliance.”

“It’s been a big shock,” said the head of a rival firm, on condition of anonymity. “The major concern is whether this will damage the reputation of the industry as a whole.”

Yamada added in his statement that the firm will set up a corporate governance division that will aim to “ensure strict adherence to various laws and regulations overseeing our agency’s policies.”

He ends by assuring clients that “we would like to continue our long term working relationships as before.” However, rival agency heads are expecting turbulence among Kyodo clients and employees. “They are both quite disturbed by the situation,” said the agency head.

The development may make Kyodo more attractive as an acquisition target, added the agency head, pointing to persistent speculation that agency giant Dentsu would like to acquire a pure PR firm. Last year Dentsu rival Hakuhodo acquired Ozma, considered one of Japan’s ‘big three’ PR firms alongside Kyodo and PRAP.

Parallels are being drawn between Kyodo and Olympus, which has found itself embroiled in a similar financial scandal, albeit on a much bigger scale.

Kyodo recently inked a partnership with longtime affiliate Ruder Finn.  

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