Corporate Governance Risks in Japanese Multinationals: Lessons from Suntory's Post-Niinami Era

The resignation of Suntory Holdings’ CEO Takeshi Niinami in September 2025 over a cannabis-related scandal has exposed deep-seated governance risks in Japanese multinationals. This case study underscores how leadership vacuums, family-centric governance, and regulatory missteps can erode investor confidence and destabilize long-term growth strategies.

Leadership Vacuums and Governance Flaws

Niinami’s abrupt exit followed a police investigation into his possession of supplements containing THC, a substance strictly prohibited in Japan [1]. Despite his claim of ignorance about the legality of the products, the incident forced Suntory’s board to accept his resignation, highlighting the fragility of its “top-two” leadership model. Niinami and Nobuhiro Torii, the president and a founding family member, had shared executive duties to balance tradition with innovation [4]. However, the scandal revealed a lack of checks and balances in a board dominated by family members (90% ownership) and with minimal external oversight (only one non-Japanese director) [4]. This structure, while historically effective in Japan, now appears ill-suited to navigate global regulatory complexities and rapid market shifts.

Reputational Damage and Market Reactions

Suntory’s stock initially surged 2% on the day of Niinami’s resignation but quickly retreated, closing the year with a 6% decline amid ongoing market skepticism [1]. Analysts questioned the company’s ability to meet its ambitious ¥2.5 trillion revenue target by 2030, citing governance concerns and a lack of clear succession planning [3]. The reputational fallout extended beyond financial metrics: Suntory’s corporate image, long tied to Niinami’s bold advocacy for shareholder value and operational efficiency, now faces scrutiny over ethical lapses [2].

Broader Implications for Japanese Multinationals

Suntory’s crisis mirrors systemic challenges in Japanese corporate governance. The country’s reliance on family-controlled boards and cultural aversion to external scrutiny create vulnerabilities during leadership transitions. For instance, the absence of robust compliance frameworks—exacerbated by Niinami’s alleged unawareness of Japan’s strict drug laws—exposes companies to regulatory risks in global markets [3]. This is particularly critical for multinationals like Suntory, which operates in 50 countries and must navigate diverse legal environments.

The Path Forward

Nobuhiro Torii, now assuming greater leadership responsibilities, has emphasized the need to “regain trust” through governance reforms [4]. However, the path to recovery will require more than symbolic gestures. Suntory must diversify its board, enhance transparency, and invest in compliance infrastructure to align with global standards. Investors should monitor whether these changes translate into improved stock performance and operational execution.

For Japanese multinationals, the Suntory case serves as a cautionary tale: traditional governance models must evolve to address modern risks. Failure to do so could lead to repeated crises, eroding both market value and brand equity.

Source:
[1] Suntory says CEO Niinami resigns after buying potentially illegal supplement [https://www.reuters.com/sustainability/boards-policy-regulation/suntory-says-ceo-niinami-resigns-after-buying-potentially-illegal-supplement-2025-09-02/]
[2] Suntory's Ex-CEO Ruffled Feathers Before Exit Over Drug Probe [https://www.bloomberg.com/news/articles/2025-09-02/suntory-s-ex-ceo-ruffled-feathers-before-exit-over-drug-probe]
[3] Leadership Crisis at Suntory Holdings: Implications for Global Expansion [https://www.ainvest.com/news/leadership-crisis-suntory-holdings-implications-global-expansion-shareholder-2509/]
[4] Suntory's corporate culture could complicate growth plans [https://familybusinessmagazine.com/uncategorized/suntorys-corporate-culture-could-complicate-growth-plans-5-2/]