U.K. Post Office Scandal: Fujitsu’s Responsibility to Supervise Subsidiary Part of the Question

Any misconduct at an overseas subsidiary can undermine the credibility of its parent company. This case shows how important proper management of local subsidiaries is for Japanese companies expanding business overseas.

In the United Kingdom, more than 730 managers of post office branches, called sub-postmasters, and others were indicted for theft and fraud between 2000 and 2014. They were investigated for false accounting because the balances at counters were lower than the records in the accounting system, but in fact they were being wrongly accused due to flaws in the system.

Most sub-postmasters are sole proprietors who are contracted by the Post Office to provide customer services. After being indicted, many of them lost their jobs or went bankrupt. Some even committed suicide. The damage is extremely serious.

In response to a lawsuit filed by the sub-postmasters and others, the court found in 2019 that the shortfalls in balances were caused by flaws in the accounting system and ordered the Post Office to pay compensation, but so far only some of the victims have received compensation.

The accounting system in question was developed by a British company that Fujitsu Ltd. had acquired as a subsidiary. Earlier this month, a British TV network aired a drama about this miscarriage of justice, which drew the attention of British society, and there are growing calls for Fujitsu to pay compensation as well.

At a public hearing held on Friday by an investigative committee set up by the British government, the executive officer in charge of Fujitsu’s European operations admitted, “Right from the very start of deployment of the system, there were bugs and errors and defects.” He said that the company had also informed the Post Office of the problem.

If so, why were the system’s defects not disclosed to the public when numerous sub-postmasters and others were being indicted on suspicion of theft and fraud? Why did the Post Office continue to go after such individuals based on incorrect information? The truth should be revealed.

Fujitsu says that it has a moral obligation and is willing to cover part of the compensation to be paid by the U.K. government. Fujitsu should deal seriously with the compensation issue.

In recent years, Japanese companies have been aggressively merging with and acquiring overseas companies in order to expand their business globally. If they do not ensure that their overseas subsidiaries are well-governed after acquisitions, their own reputations could be damaged.

Other Japanese companies need to be aware of this fact.

Yet another major lesson is how vulnerable a society is when overly dependent on computer systems. In Japan, there have been a series of computer system failures at major banks and cellphone companies, not to mention problems related to the My Number personal identification cards.

It is essential that developers of computer systems do their best to be prepared so that errors and failures in their systems do not cause major disruption of society.

(From The Yomiuri Shimbun, Jan. 23, 2024)