3.

00
Carlos Ghosn’s appointment as president and CEO and Nissan was a high
profile experiment: an opportunity for corporate Japan to see that an
outsider with a risk-taking, buccaneering, approach to management could
help lift it out of its long slump. The nature of his fall could unwind years of
progress in opening up the Japanese economy to global talent and ideas.
A billboard in Beirut: Carlos Ghosn
ON THE COVER
is a controversial figure both
in Lebanon and Japan.
TOKYO The Tsuru banquet room at the Hotel
New Otani in Tokyo is decorated with images
of Japanese cranes in flight. The white-feathered
bird is regarded in Japan as a symbol of longevity
and faithfulness, and formerly featured on the
most common bank note, the 1,000 yen bill; tsuru
no hitokoe -- “the crane’s word” -- is a Japanese
proverb for a decisive intervention from an
authoritarian figure. Its broad wings often carry
COLLISION
it across great distances.
Longevity, faithfulness -- and one particularly
long flight -- were very much on the minds of the
hundreds of executives who met in the banquet
COURSE
room to mark the start of the year on Jan. 7. They
had returned from the traditional shogatsu holiday
break to the shocking news that Carlos Ghosn,
the once-celebrated, now-disgraced Nissan Motor
Escaping under a cloud and in a box, leader, had made a dramatic escape from house
Carlos Ghosn’s final legacy may be arrest in Tokyo.
These new year meetings, such as that held at
a clash between Japan’s traditionalists the New Otani on an unusually drizzly January
and its reformers day, demonstrate the consensus-driven nature
of corporate Japan. Competitors huddle with
JOHN GAPPER Editor-at-large, Nikkei Asian Review, politicians to listen to the prime minister speak,
MITSURU OBE and ERI SUGIURA Nikkei staff writers to exchange pleasantries and chat about the year
ahead. Ghosn -- who became a household name,
first for leading the restructuring and revival of
Nikkei Asian Review - Special excerpt from Jan. 20-26, 2020 Print edition. Nikkei Inc. No reproduction without permission.
Nissan in 1999, and latterly for his arrest in 2018
for allegedly understating his compensation --
represented a challenge to this collegiality, both in
style and substance.
For most attendees, the Ghosn affair was
judged too awkward to discuss openly by many
in a culture that typically dislikes open conflict.
However, the nature of his flight -- smuggled onto
a private jet in an audio equipment case -- and his
flamboyant news conference in Beirut, in which he
attacked the Japanese judicial system and accused
the country of “repaying me with evil,” have
turned it into a global story. Many in Japan would
level the same accusation at Ghosn, who, having
been accused of a serious corporate crime, fled
before he could face trial.
Although at its heart the case is a criminal
one, the nature of his performance, amid the
complex international corporate battles at Nissan,
has rekindled a sensitive debate about Japan’s
relationship with overseas talent and imported
“superstar” CEOs.
Former Nissan board member Toshiyuki
Shiga worked alongside Ghosn for nearly 20
years, including a spell as the automaker’s
chief operating officer. Speaking to the Nikkei
Asian Review on the fringes of the meetings, he
Reuters
 Akira Kodaka
ON THE COVER

“When you are a foreigner going to Japan, you

are going for one reason and that is it. It is turning
around the company, period,” Ghosn recalled WHEN “
five years ago, talking to students at Stanford YOU ARE A
University. “That is what people are expecting FOREIGNER
from you. How much you work, what you do, if
GOING TO
you have problems, if you have remorse, nobody
cares. ‘Fix it’: That is the message.” JAPAN, YOU
He arrived with a reputation for cost-cutting ARE GOING

Ghosn was credited with the turnaround
of Nissan Motor, ruthlessly rationalizing
the supply chain and slashing jobs to
return the company to profit.
Shinya Sawai
and restructuring in France, both at Michelin and FOR ONE
then Renault, becoming known as “Le Cost Killer.”
REASON AND
But he was subtle enough to know that he could
not simply impose that formula in Japan: Although THAT IS IT.
he brought a team of 30 managers from Renault, IT IS TURNING Ghosn leaves Tokyo Detention House in disguise
in March 2019. At the start of his tenure, he famously
he turned down offers of help from consulting AROUND THE
donned a factory jacket and spoke with Nissan workers
companies and spent three months listening to
COMPANY, rather than engage consultants.
employees himself. Clad in a factory jacket, he was
a humbler, more consensual figure than the one on PERIOD

expressed disappointment with his former boss,

and frustration that Ghosn had fled Japan instead
of staying to fight his cause.
“Carlos Ghosn used to be a person who never
ran away from an adversary. He tackled it head
on. When I heard the news, I was very surprised
and shocked. I missed the old Ghosn,” Shiga said.
“I wished he had tried to influence Japan from
within. This is not a country that turns a deaf ear
to calls for change. ... My fear is that it gives an
impression that Japanese companies are insular
and drives away talent from overseas.”
Many in Japan feel a similar sense of betrayal,
made worse by the bitter attacks on its judicial
system. With Ghosn gone, Japan is now being
forced to grapple with his legacy, and to decide
whether to keep faith with the business revolution
head of Japan for the U.S. asset manager Wisdom
Tree. ‘’But this country is very clear that it does not
display in Beirut this January.
“I know how much effort and pain must be
endured and am painfully aware of the need for
”
Carlos Ghosn
significant that he is credited with driving the
consolidation of Japan’s steel industry, with the
merger of Kawasaki Steel and NKK in 2001.
Former head of the
want superstar American-style CEOs and personal sacrifice,” Ghosn declared in October 1999 as he Ghosn also had an influence on Nissan’s
Nissan-Renault-
enrichment. I fear the reaction will be a closing of unveiled his Nissan Revival Plan. It included Mitsubishi alliance, corporate culture. He took aim at the tradition
the Japanese mind.” tough measures -- the closure of five plants and addressing students of lifetime employment and promotion by age
loss of 21,000 jobs, or 14% of the workforce. He also at Stanford University and seniority, which he saw as blocking talented
‘LE COST KILLER’ The “old Ghosn” arrived at struck at the heart of Nissan’s keiretsu, changing in 2014 younger managers from rising. Critics say that he
I MISSED THE “ Nissan’s Ginza headquarters in 1999 to tackle a
crisis that had defeated Japan. Nissan Motor was
contracts to save money and eliminating its cross-
shareholdings. The shock to the system was so
also gradually abandoned his consensual approach
in favor of concentrating power at the top, ruling
OLD GHOSN. a venerable Japanese icon, founded in 1933, that
had become one of the world’s biggest carmakers.
I WISHED HE It entered the U.S. in 1958 with its Datsun brand
HAD TRIED TO and in the 1980s and 1990s, along with Toyota
Compensatory damage? How did Ghosn’s pay compare?
Median CEO compensation levels for 2018 Compensation packages of top automotive industry executives
INFLUENCE Motor, became known for beating Detroit to make (in millions of yen) (as of November 2018*, in millions of dollars)
JAPAN FROM higher-quality cars with innovative manufacturing
techniques. Base salary Annual incentive Mary Barra CEO of General Motors 21.9
WITHIN But by 1999, the company was in deep trouble. Long-term incentives

”
Carlos Ghosn Former Chairman of Renault Nissan
in which he was the most visible figure. It had made losses in seven of the eight previous 0 400 800 1,200 1,600 Nissan-Renault-Mitsubishi 8.4 6.5 2.0 16.9
Over the nearly 20 years of Ghosn’s tenure, years, few of its models were profitable, and costs alliance Mitsubishi
Japan has changed. Foreign executives are more Toshiyuki Shiga were inflated by its practice of purchasing parts U.S. (6.9%) Jim Hackett President and CEO
Former board member of Ford Motor 16.7
common; at many levels, the country is trying at Nissan Motor and
from within its 1,400-strong keiretsu group of
Bill Ford Executive Chairman
to open up to international talent to deal with a colleague of Ghosn’s suppliers and associated businesses. It had built Germany (0.1%) 15.6
of Ford Motor
profound shortage of labor. However, the ill- up $19 billion in debt and its banks did not want
Dieter Zetsche Former CEO of Daimler 9.8
feeling created by Ghosn’s sudden flight, and to lend more, but its executives still hesitated over U.K. (No change)
his attempt to push an alternative narrative what to do. Harald Krueger Former CEO of BMW 9.5
to that of Nissan and Japanese prosecutors, Renault bailed the company out, taking a 37% France (–2.5%)
could have consequences for Japan’s gradual stake -- later raised to 43% -- and forming an Annual growth Dan Ammann President of General Motors 9.2
internationalization. unprecedented global alliance between Japanese Japan (3.3%) in total compensation Chung Mong-koo Chairman and CEO
4.0
“Ghosn was the most brilliant operational and European carmakers. Louis Schweitzer, the of Hyundai Motor
manager of our generation and the start of the then-chairman of Renault, sent Ghosn, a Brazilian- Analysis covers publicly available CEO data for 446 companies,
each with more than 1 trillion Japanese yen in revenue in 2018; Currencies converted to U.S. dollars; compensation includes salary, restricted stock awards,
old Japan realizing through example that global born, French-Lebanese executive, to break with fiscal year ending December or March 2019 for some Japanese other compensation and bonus; compensation at Mitsubishi Motors is calculated by taking an average
companies of total director pay *When Carlos Ghosn was removed
leadership actually has its merits,” says Jesper Koll, tradition and implement a painful restructuring. Source: Willis Towers Watson Source: Reuters

Nikkei Asian Review - Special excerpt from Jan. 20-26, 2020 Print edition. Nikkei Inc. No reproduction without permission.
 ON THE COVER

by tsuru no hitokoe, rather than by consensus. Under Ghosn, Nissan The disquiet in some quarters was about more The Nissan turnaround
Nissan-Renault
“I don’t make scenes or attack people. I’m went from than Ghosn as an individual, but about what he alliance inked
Net income –4 0 4 8
firm, but not confrontational,” Ghosn wrote of his a loss of represented -- a more buccaneering, Anglo-Saxon (in billions
Nissan

680
own style in his 2004 book “Shift: Inside Nissan’s style of management, motivated by shorter-term of dollars)
“Revival Plan”
FY1998
Historic Revival.” metrics, including compensation. begins,
His medicine worked: Nissan hit the targets Japanese companies traditionally recruit young starting with
the dismantling

Nissan as COO
Ghosn joins
he had set of restoring operating profitability and billion yen workers as lifetime employees and restrain of the keiretsu
2000
halving its debt within three years, and Ghosn in fiscal 1999 to differences in pay to maintain internal mobility. supply chain
became an icon in Japan. He was popular -- even The system shares company profits with many “180 Plan,”
revered -- for risking his career on Nissan. He was a profit of over employees, limiting high rewards at the top level. targeting extra

300
2002 1 million vehicle
featured in manga comics and the government Although 10 senior managers, including Kazuo
sales, 8%
awarded him a medal for outstanding achievement Hirai at Sony, Ryota Akazawa at Fuso Chemical, operating margin

Getty Images
in 2004. Ghosn took his plaudits modestly, writing and three top executives of SoftBank Group were and zero
billion yen 2004 automotive debt
of the broader lesson: “Nissan’s successful rebirth each paid more than 1 billion yen ($9.1 million) in
is a life-size illustration of what this country is the following year 2018, they are exceptions. Nissan establishes
capable of.” Mercer Japan, the human resources consultancy, China JV

and president of Renault

Ghosn appointed CEO
Source: Nikkei database
2006 with Dongfeng
“The biggest contribution Ghosn made to found that CEOs of companies headquartered in Motor Group
the Japanese economy is that he told Nissan the Japan and employing between 7,000 and 12,000 Carole Ghosn, Carlos’ poor. The government has a target of 345,000
Global financial wife, takes questions
importance of making money,” says Atsushi people were paid an average of 87 million yen in crisis; U.S. new migrants under the visa over five years, with 40,000
2008 at his press conference
Osanai, a professor at Waseda Business School and 2018. This was 80% less than at U.S. companies auto sales in the first year. However, by November, just over
fall 21% in Beirut in January.
a former Sony executive. “The first thing he did of the same scale, and 50% less than German 1,000 people had arrived under the scheme.
was to stop various research programs and instead equivalents. “There is a clear lack in benchmarking Nissan commits “The Japanese labor market is a case of
2010
focus on design of products that could sell in the remuneration of global human resources among 4 billion euros to Galapagos syndrome, just like its old feature phone
international market. That is how businesses should Japanese companies,” says Miwako Itoh, a senior develop electric market,” says Waseda Business School’s Osanai,
vehicles
operate. If there is anything Japan has to think consultant at Mercer. “Workers’ wages and executive compensation in
2012
about, it is to get serious about making money first.” Japan’s pay and promotion structures remain Nissan establishes Japan are kept low by the lack of labor mobility
JV with Russian
a barrier to attracting international talent into the Technologies between Japan and the rest of the world. It has
CULTURE CLASH Being too serious about country -- something that the government has to acquire a stake helped Japanese companies to keep personnel
2014 in AvtoVAZ
making money may have been Ghosn’s downfall. made a stated ambition under Prime Minister costs low, but it also meant that they have trouble
Even before his arrest in 2018, revelations about his Shinzo Abe. Nissan acquires attracting international talent.”
pay and gilded lifestyle, including a 2016 costume Internationalization is one of the driving 34% of Mitsubishi Pay is only part of the problem. At a broader
Business reforms under 2016 Motors
party given with his wife Carole at the Grand Ghosn drove major
principles of “Abenomics,” which seeks to make level, language and culture can be challenging.
Trianon in Versailles, offended some in a country consolidation in Japan’s Japanese companies and the Japanese economy Nissan sells stake Japan is one of only a few developed countries
that shuns public displays of wealth. steel sector. more competitive with their global peers. The in AvtoVAZ without comprehensive anti-discrimination

but remains chairman

government has reduced corporate taxes and
increased public spending to try to stimulate
growth, and has tried to push for reforms to
some long-standing corporate practices that
outsiders see as anti-competitive -- such as listed
companies’ cross-shareholdings and the absence of
independent directors on boards.
The government wants to raise foreign direct
investment to 35 trillion yen this year from 30.7
trillion yen at the end of 2018, and to encourage
more executives and skilled workers to come to
as CEO in April 2017,
Ghosn steps down
2018 legislation.
Ghosn is arrested
by Japanese Ghosn’s claims to have been treated unfairly
authorities and
fired by Nissan are now unlikely to ever be proven in court,
but there is a sense -- shared by Japanese and
Fiscal year ends in March of following year
Source: Company, Nikkei research
international executives -- that foreign executives
are often regarded as mercenaries, brought in to
solve especially tough challenges. That has bred
mistrust, particularly when their performance dips,
gross domestic product could shrink by 25% in the or when they come up against governance issues.
next 40 years. Some, such as Christophe Weber at Takeda
“Nothing new can be created out of uniformity,” Pharmaceutical and Sarah Casanova at

Japan. Although the country has long limited
immigration, its demographics are widely
acknowledged as a profound challenge that needs
to be addressed. Its population of 127 million is
Koji Uema
AP
says Nobuaki Kurumatani, chief executive of McDonald’s Japan, are regarded as successful.
Toshiba. “Look at Japan’s World Cup Rugby team. But Sir Howard Stringer’s record at Sony was
We won’t slow our efforts to pursue diverse talent.” mixed and Olympus’ appointment of Michael
“The True Story of
A “specified skilled worker” visa scheme for Woodford as CEO in 2011 led to a fierce clash

Carlos Ghosn,” a
now falling and the International Monetary Fund workers in labor-constrained industries was manga published after he disclosed an accounting fraud. He lost
has warned that, without economic reform, real established last April, although takeup has been in Japan in 2001. his job, and the scandal subsequently led to the

Nikkei Asian Review - Special excerpt from Jan. 20-26, 2020 Print edition. Nikkei Inc. No reproduction without permission.
 ON THE COVER

resignation of the company’s entire board and the
arrest of several senior executives. As difficult as
their experiences may have been, the parallels with
the Ghosn case are limited -- no other high-profile
foreign CEO has faced, and fled, criminal charges.
However, such experiences have left lingering
doubts about how deeply Japan wants the
disruptive effect of recruiting from abroad.
“Japanese corporate culture is extremely dense
and it is hard for them to fully accept anyone
who comes from outside and has not absorbed
it,” says Stephen Givens, a Tokyo-based lawyer
who advises on deals. “If I were a talented foreign
executive, the last thing I’d want to be was
BUT IS AFRAID
that progress could stall, or even reverse. structures when a subsidiary was doing better
Departure, terminal
There have been signs of that reversion, notably than its parent. Kato cites the examples of Seven-
Controversial exits by foreign executives
in October, when the government unveiled a at Japanese companies Eleven Japan, which was owned by the Ito-Yokado
law to force the disclosure of stakes of more than (year of exit, name, role(s) held, company) supermarket chain, and Fuji Television Network
1% in companies in strategic industries, such as and Nippon Broadcasting System. Japanese
JAPAN aerospace. After protests from activist investors, it 2015 Toyota’s first female officials would have liked to see the same approach
REALIZES clarified that the law would not apply to them -- executive was three at Nissan, he says. METI says that it is observing
Julie Hamp months into the job when
provided they did not seek to gain board seats, or events at Nissan and Renault, but any changes are
IT NEEDS try to force the sale of business units. “One of the Head of corporate
she was arrested in her
a matter for the companies.
Roppongi hotel for the
TO OPEN UP biggest Abe legacies is improvements in corporate
communications alleged import of narcotics. This paradox at the heart of Abenomics --
Hamp maintained
TO GLOBAL governance and they do not want to lose that,” Toyota
that the shipment of 57
that Japan realizes it needs to open up to global
Motor
BUSINESS, says Nicholas Smith, Japan strategist at CLSA. oxycodone pills was business, but is afraid of losing influence over
Although the law was less draconian than intended for her sick father; Japanese research and development, as well as
feared, it coincided with tensions over Nissan’s
she resigned and was
technology -- has erupted in the Ghosn affair. But

Takuya
eventually released without
OF LOSING

Imai
president of a Japanese company.” future. Analysts detected the hand of METI, and indictment. it has far broader implications for the future of the
INFLUENCE its wish to retain control over key sectors and economy, and its attitude to global integration. The
PIVOTAL MOMENT This uncertainty about OVER technologies. Ghosn, in his Beirut press conference, 2013 Sony’s first non-Japanese alliance between Nissan and Renault seemed, for

43.4%
executive closed his nearly
whether foreign talent should be something for blamed his downfall on Nissan’s fear of a Renault two decades, to provide the best of both, but when
short-term expedience, or part of the long-term
JAPANESE takeover, dating back to the 2015 Florange law in
Sir Howard Stringer 16-year career at the
a battle for control developed between France and
company after a string
fabric of Japan Inc., speaks to a wider ambivalence, R&D AND France, which doubled voting rights for long-
CEO, chairman of annual losses left the Japan, it proved unstable.
notably within the still-powerful Ministry of TECHNOLOGY term equity stakes and increased the influence of Sony company almost $6 billion Renault’s stake “I’m not going to waste my time with someone
in the red. Successor Kazuo
Economy, Trade and Industry, over whether the French state. “Some of our Japanese friends Hirai is popularly credited
in Nissan Motor whose sole concern is his personal interest,”
opening up is a good idea at all. Some believe it thought the only way to get rid of the influence of with the company’s revival: Ghosn wrote in “Shift” of his 1999 effort to forge

15%
A flourishing gaming unit
weakens the economy’s strengths of long-termism, Renault on Nissan is to get rid of me,” he said. internal consensus at Nissan. He later weakened
and image sensor business
consensus and social harmony. Some Japanese lay the outbreak of national his authority by becoming too concerned about

Reuters
has again lifted profits
“I sometimes think that Japan followed Anglo- conflict at Ghosn’s door because he made Nissan to record highs. his own pay. Having created a groundbreaking
Nissan’s stake
Saxon business practices too much during the overreliant on one person -- himself. “A global alliance, in leaving Japan so bitterly he may have
Naylor abruptly resigned in Renault, on par
2000s,” says Sota Kato, executive director of the company requires governance that monitors 2012
with that of the undermined the phenomenon that he embodied.
after less than two years
Tokyo Foundation for Policy Research and a former Ghosn in 2001 with executives, but Nissan became global without Craig Naylor That is not guaranteed, and opening up still has
in the role, the company’s French government
METI official. “The Western system works for some Junichiro Koizumi, prime it because of his extreme leadership style,” says second non-Japanese many highly placed proponents. Masayuki Hyodo,
minister at the time, CEO CEO to do so. Leadership Source: Companies
industries. The Japanese system works for others.” during the test drive
Takaki Nakanishi, CEO of Nakanishi Research chief executive of the trading company Sumitomo
Nippon instability at the company,
For some, discord between Ghosn, Renault and of a Nissan model at Institute, an auto industry intelligence company which acquired U.K. Corp., told Nikkei that, while Ghosn’s flight
Sheet
Nissan after years of harmony is a warning sign Japan’s parliament. in Tokyo. “He protected it from the French Glass glassmaker Pilkington was “very regrettable,” he remains optimistic.
in 2006, was seen
government and Renault, but he became selfish “Globalization of society and business activity
as representative

Reuters
toward the end to satisfy his own interests.” of Japan Inc.’s strained is something that is no longer reversible. There
Even though the Renault-Nissan alliance efforts to globalize. is nothing difficult about hiring foreign talent.
succeeded in its initial goal -- saving Nissan -- over Companies in other countries are doing it; there is
In Japan’s most infamous
the following two decades, its popularity waned 2011 no reason to think Japanese companies cannot.”
case of corporate
substantially. Michael Woodford whistleblowing gone sour, However, for Ghosn’s critics, and those who
“There is a widely held belief, within Nissan and CEO, President,
British-born Woodford remain opposed to the loss of control over the
– who rose from medical
the METI, that the relationship between Nissan chief operating officer country’s flagbearers, the sour ending to the once-
equipment salesman to top
and Renault is lopsided and needs to be corrected,” Olympus executive over 30 years – was admired turnaround story has served to show the
says Kato. The fear was that Nissan would fired after sounding the alarm long-term difficulty of creating a fusion of Japanese
on potential accounting fraud
become a “cash dispenser” for the French group, and global approaches to business.
two weeks into his role as
developing French-owned rather than Japanese CEO. A very public conflict Nissan’s alliance with Renault was widely
technology. That goes to the heart of how METI played out between interpreted as a watershed in Japan’s liberalization
Woodford and his former
regards its oversight role in the economy. and embrace of a Western-style free market. Twenty
employer as the scandal
To outsiders, it is an alien idea that Renault’s deepened, culminating years on, it is clear that economic conservatism is

Reuters
stake in Nissan should be “corrected” because its in the exposure of decades still a powerful force in Japanese politics. “If the Abe
of concealment of losses.
Reuters

bet in 1999 paid off better than Japan expected. But government had been in power then, it wouldn’t
within Japan, there have been changes to capital Source: Nikkei Asian Review research have let Renault buy Nissan,” Kato concludes.

Nikkei Asian Review - Special excerpt from Jan. 20-26, 2020 Print edition. Nikkei Inc. No reproduction without permission.