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In a corporate environment rocked by scandal, shareholder skepticism and a rising tide of D&O lawsuits, many executives are scrambling for cover, leaving their risk managers to ensure that their company does not become the next Enron, WorldCom or Arthur Andersen. But how? For manufacturing giant Honda of America, it is as simple as doing the right thing.
Honda of America Manufacturing, Inc. (HAM), is a subsudiary of the Tokyo-based Honda Motor Company, Ltd., which is Japan's third-largest auto maker and the world's leading motorcycle manufacturer. Honda's power products division also makes lawn mowers, snow blowers, portable generators, outboard motors and other commercial and residential machinery. In 2002, Honda enjoyed a 26 percent increase in sales, and projected to increase them by another 14 percent in 2003. In terms of net sales and revenues, Honda went up nearly 14 percent in its last fiscal year, due in large part to strong automobile sales in Japan and North America.
That is where HAM comes in. Based in Marysville, Ohio, HAM is Honda's chief manufacturing operation in North America and administrates four production facilities-two auto-making plants, a motorcycle plant and an engine plant. Honda's surging sales have forced HAM's facilities to run at capacity, and so far, the company has managed to keep up with its impressive production demands. Oftentimes, such conditions can tempt employees, managers and directors to cut corners, especially when they think nobody is looking. It is a pitfall that can tumble any company, large or small. HAM is no exception, which is why it has devoted substantial resources, time and manhours to a companywide Legal Compliance and Business Ethics program designed to make sure that if a potential corporate misconduct problem arises, the company can identify it and address it before it explodes.
The program has been a resounding success for HAM, which has also exported it to its many affiliated suppliers and distributors in an effort to hedge corporate misconduct risks away from any of HAM's facilities. It is an outstanding example of the power of proactive risk management, but to the casual observer, it seems to do little more than prohibit unethical or illegal behavior and require that such activities are reported to the corporate compliance office should they arise. But...