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It must have been over 20 years ago. I was asked to be a lecturer for a training session for newly appointed directors at a listed company. I believe the theme was "Compliance and Corporate Management."

After the lecture, the company's senior managing director happened to approach me. He whispered in my ear, "Professor Oka, you can't put food on the table with compliance."

Using a car as an analogy, it was an era when profit-generating businesses were seen as the accelerator for corporate management, while compliance was thought of as the brake. Compliance was seen as a troublesome and burdensome existence that didn't earn money. Time has passed since then. Today, compliance has become the standard of conduct that drives corporate management, and a single compliance violation can lead to a situation that threatens a company's very survival. However, ever since that lecture, the question of whether compliance and profit are in conflict has always remained within me.

By the way, there are various definitions of what compliance is. Looking at the broad framework, compliance is understood to include not only legal compliance but also broader social and corporate ethics, as well as following the company's own internal rules to meet social demands and act with integrity.

So, what are these social demands? The complexity of modern society knows no bounds. Not only are laws revised, but the substance of required corporate ethics deepens moment by moment. The values of individual citizens have also diversified. Japan's lifetime employment system has collapsed, and employees' loyalty to their companies has weakened. Under the Whistleblower Protection Act, internal reporting systems have been established, and individuals have become information broadcasters through SNS. To gain trust from a constantly changing society, compliance should not be viewed as a static and fixed concept. The essence of compliance lies in cultivating the ability to constantly ask oneself: what is the right way to face a changing society, what actions will not betray social trust, and what actions will earn social trust? To achieve this, corporate ethics should be the most emphasized part of the aforementioned definition of compliance. Business and ethics. At first glance, they appear to be incompatible, but corporate ethics exists precisely in the balance between the two. It is essential for a company to pursue profit and maintain efficiency and rationality while upholding integrity, responding sincerely to social demands, and providing value. Compliance is a dynamic and continuous corporate mission to sensitively understand society in unpredictable circumstances, respond to social demands, and continue striving to earn trust.

Now, let us return to the opening question: "You can't put food on the table with compliance." Since a company is a legal entity for profit and its primary focus is on conducting external activities to gain profit, there is no doubt that a company is an entity that pursues profit. For those on the front lines, the pursuit of profit is earnest and always an urgent issue. From one perspective, a compliance violation only becomes a problem once it is discovered, but profit is strictly presented as a figure right in front of one's eyes—not just every year, but every quarter. When a compliance violation that has not yet manifested conflicts with the acquisition of immediate profit, humans, due to their weakness, naturally prioritize profit regardless of the presence of malice, resulting in a compliance violation.

The manifestation of this phenomenon is what the public calls a corporate scandal, and this is one of the reasons why corporate scandals never disappear. The question of compliance and profit from over 20 years ago is a fundamental and essential problem inherent in modern corporate management, and it remains a deep-rooted issue that is still alive today.

In modern corporate management, compliance and profit should be viewed as one and the same. Managers are required to state clearly that profit obtained by violating compliance is no longer profit, that they do not want such profit, and that it should not be acquired. Indeed, "trustworthy profit" and "rightful profit" are what companies in modern society should pursue. When every individual in a company asks themselves what social trust is and what actions should be chosen to earn that trust, they finally face the essence of compliance in modern society. Ethical companies, without exception, set forth a purpose or mission based on a management philosophy. This serves as a management guidepost when one is lost or in trouble. By accepting social changes with management philosophy as the axis, companies can acquire profits compatible with compliance, create new value, and contribute to society. This is the key point of compliance in modern corporations. By looking at modern society and continuing to ask what management should be for that purpose, companies can walk the path toward improving corporate value over the medium to long term.