The Fall of Carlos Ghosn

Shinzo Abe’s 2012 corporate governance reforms have been touted as successful, but the recent arrest of Nissan chairman Carlos Ghosn for alleged criminal financial misdoings suggest otherwise. The articles provides context by describing one of the largest financial accounting frauds by another Japanese company, Olympus. In 2011, a British-born businessman was promoted to CEO of the optics company. Two weeks later, he exposed the company for over $1.5 billion in concealed losses, which included dubious payments to criminal organizations. Corporate misdoings are not uncommon as the articles brings up a multitude of examples, but the arrest of Ghosn is significant because it suggests the failure of Abe’s plan to shift power from the boardrooms to shareholders and to encourage boards to hire more foreigner board members.

There seems to be a reoccuring theme in this class about the Japanese government encouraging companies to take on foreign talent and the subsequent resistance by Japanese companies. In this case, companies were encouraged to “add two independent directors.” Nissan responded bring hiring a racecar driver and a retired bureaucrat, which is basically a joke. A more diverse board could have spotted Ghosn’s wrongdoings earlier and checked the chairman’s power. It’s almost universally agreed that increased diversity in the workplace improves performance in the long run as shown by respected studies like one by McKinsey. It’s not just a PR stunt. However, it always seems that Japanese companies fail to act of evidence like this.

What’s also interesting to note is the Ghosn is a foreigner, who completely revitalized Nissan from near bankruptcy to financial success in the 1990s. He was so successful that he was nicknamed “Mr. Fix it” and achieved celebrity status in the Japanese business world. After doing some more research, I also learned that you dismantled traditional Japanese business practices like the “life-contract” and “keiretsu”. His success can be seen as evidence for how foreigner talent can improve Japan, and it’s a shame to see success a hero fall down like this.