There is an uproar in Japan surrounding Sanrio, the entertainment company that produced popular characters such as ‘Hello Kitty’ and ‘Kuromi’. Market confidence has been shaken as it has postponed the release of its earnings due to suspected irregularities in executive compensation.

According to local media including the Nihon Keizai Shimbun on the 4th, Sanrio announced it will postpone the announcement of its March fiscal-year results that had been scheduled for the 13th. Japanese companies, whose fiscal years run from April to the following March, typically announce their consolidated full-year results (results) around mid-May.

Behind the postponement lies suspicion that an executive improperly received compensation. In a disclosure on the 16th of last month, Sanrio stated, “There are suspicions that Executive A received inappropriate compensation over a period of years.”

According to an internal whistleblower report received by Sanrio, A is said to have received separate compensation amounting to hundreds of millions of yen (several billion won) from a North American subsidiary related to intellectual property (IP). Sanrio said it immediately dismissed A from the board and also suspended their duties.

Having appointed an external organization to conduct the investigation, Sanrio resolved at a board meeting on the 1st to establish a special investigation committee. Regarding this, Sanrio explained, “Taking into account factors such as expanding the scope of the inquiry, we determined that it is appropriate to proceed under a structure that ensures a higher level of independence and objectivity,” adding, “The investigation is still underway; while there has been progress in ascertaining and organizing some facts, we have not reached an overall assessment.”

It went on to say, “We once again deeply apologize for the significant inconvenience and concern caused to stakeholders, including shareholders, investors, and business partners, by this matter,” and bowed in apology.

Locally, disappointment is mounting, given that Sanrio has long won the public’s affection by putting forward lovable characters. On social media such as X, reactions include, “I thought it was a world of dreams and kindness, and my heart feels heavy.”

The share price has likewise been unable to avoid a decline. As of the 1st, the last trading day before the start of Golden Week (Japan’s long holiday from late April to early May), Sanrio’s closing price was 910 yen (about 8,500 won), more than 10% lower than on the 16th of last month, when the allegations first came to light.