Tokyo, Japan -To lose one leader over
questionable salary payments may be regarded as a misfortune; to lose two looks like carelessness. The importance of being
transparent in corporate Japan, as the Irish playwright Oscar Wilde might have written if he had been covering the woes of
Japanese carmaker Nissan, might seem farcical to some.
In July, the company reported anearly 99 percent plungein its first-quarter operating profits. And now Japan’s second-biggest
carmaker is in the hands of an interim CEO, Chief Operating Officer Yasuhiro Yamauchi, as it navigates the tricky road ahead.
"This is very bad timing for Nissan. The global automobile industry is on a downward turn and many reforms are needed. Every
company is looking for new partners, new options and a new future," Martin Schulz, a senior research fellow for the Fujitsu
Research Institute in Tokyo, told Al Jazeera.
Nissan chief Carlos Ghosn 'arrested for misconduct'
While Japanese society is famous for its low crime rate and the scrupulous honesty of its ordinary citizens, the same can't be
said of all of its corporations and executives. Some of the biggest names in Japan Inc have been rocked by corporate scandals
in recent years, including Olympus, Toshiba and Kobe Steel.
Such scandals have been particularly prevalent in the auto industry. The ultra-competitive nature of the business is likely a
contributing factor, with Ford, Volkswagen and Daimler also facing recent troubles.
But nearly all of Japan's automakers have admitted serious missteps, including the largest, Toyota, which in 2014 paid a $1.2bn
fine in the United States for hiding the dangers of sticky accelerator pedals. Subaru, Suzuki and Mitsubishi Motors all
admitted falsifying safety inspections or fuel economy data, while Takata's faulty airbags led to multiple deaths and injuries
around the world.
Mitsubishi Motors was effectively forced into accepting a takeover by Renault-Nissan in 2016 over its woes, only for its
corporate saviour to admit the following year that it had allowed unqualified personnel to carry out safety checks. Nissan's
recently deposed Saikawa was criticised at the time for showing insufficient contrition and not bowing long or low enough when
Saikawa was forced out on September 16 after admitting to wrongly receiving 47 million yen ($435,000) in stock-related
'A special group of guys'
The corporate culture that facilitated these problems has deep roots in a society that highly values group loyalty, seniority
"People enter a Japanese company and then after 30 years a special group of guys, and it's usually men, form a board; they've
never worked anywhere else and are almost like brothers. If they're replaced, it's by another man from inside the company,"
Parissa Haghirian, professor of international management at Tokyo's Sophia University, told Al Jazeera.
"Until recently it was very normal to have no outside directors. This creates an atmosphere of, if
notcorruption, then solving problems in their own
way, which is not always transparent," Haghirian said.
The latest controversy has also pulled the Japanese government into Nissan’s orbit, both becauseFranceis a major shareholder
in Nissan's alliance partner Renault, and the fact that Prime Minister Shinzo Abe has been promoting better corporate
governance as a way to rejuvenate the economy.
While there are signs of progress towards improved accountability, this is unlikely to be the last major corporate misstep to
hit the headlines.
Former Nissan Motor Company Chairman Carlos Ghosn was released on bail in April after being indicted on fresh charges
of misdirecting company money for his personal use and underreporting his pay [April 25: Issei Kato/Reuters]
When misdeeds do occur, there are few incentives for an individual to speak out and much to discourage whistleblowing.
"There is a corporate culture that doesn't allow for confrontations, so you often don't have opinions expressed. If you plan to
stay at the company for 30 or 40 years, you don't want to take that risk," said Haghirian.
Another issue is that Japanese corporations are largely staffed with generalists whose roles are barely defined, making it more
difficult to assign individual responsibility when problems arise, notes Haghirian.
Japan introduced its Stewardship Code for governance in 2014, loosely based on that of the United Kingdom and since revised,
though most of its provisions are non-compulsory.
Companies have to announce if they are not complying with measures such as appointing outside directors, and "naming and
shaming" tactics can be effective in face-conscious Japan. Haghirian believes "it is bringing about real change".
'Corporate governance is working'
The government took the unusual step of weighing in on the decision by Nissan's board regarding the swift end to Saikawa's
tenure, touting it as evidence its reforms were effective.
"The resignation proves that corporate governance is working," Minister of Economy, Trade and Industry Hiroshige Seko told
reporters last month. "We have also been involved in supporting Nissan's implementation of corporate governance."
Ex-Nissan chief Carlos Ghosn says he didn't hide money
"I hope that Saikawa's successor will be chosen with the company's corporate governance functioning … and not through in-house
power struggle, as has been the case in the past," added Seko.
The Fujitsu Research Institute's Schulz notes that "improved corporate governance is a long-term project of the Abe
government", but sees significant structural reform as still being a way off.
"The Nissan story is an outlier, it is a story about executive pay and the outsized leadership figure of Mr Ghosn that goes
back to before the Stewardship Code," said Schulz.
"The government has been dragged deeply into this because of the presence of Renault, of which the French government is a big
shareholder. So this has got up to the national government level, with the economy ministers involved," he added.
But it’s at the consumer level that Nissan's fate will be ultimately decided. Despite classics such as the sporty GT-R and
innovative Leaf electric vehicle, sales figures have been falling.
The company saw sales fall six percent globally in the March-to-June quarter, losing market share slightly in Japan and
North America. In Europe, Nissan's share of the market fell from 3.0 percent in its 2018 fiscal year, to 2.4 percent in its
latest quarter. Nissan sales were also down in China, though it gained a little share of what was a shrinking market.
The poor results and outlook prompted the carmaker to announce job cuts of 12,500 positions in July, amounting to around 10
percent of its workforce worldwide.
The ongoing leadership problems may also take a toll on how customers view the company.
Many Nissan drivers dismissed the Ghosn scandal as a problem with a single individual, and an outsider appointed by Renault at
that. But with CEO Saikawa, who was harshly critical of Ghosn after his arrest, now also accused of being wrongly overpaid,
perceptions may be shifting.
Kanako Hosomura in her Nissan Note in Yokohama, Japan [Gavin Blair/Al Jazeera]
"One of the reasons we bought a Nissan is because the company's headquarters is here in Yokohama and I drive past their offices
quite often," Kanako Hosomura, a 37-year-old homemaker who has driven a Nissan Note for around seven years, told Al Jazeera.
"I'm very disappointed in what has been happening there, although it's difficult to get a full idea of the problems just from
reading the newspapers. But it's clear that there are some serious problems in the company."
Nevertheless, Hosomura said she would buy another Nissan, "if their cars are still safe, fuel-efficient and they look good".
"But if it comes out that there are problems with the cars they have been covering up … then that's a different matter," she
added. "They can't lie to their customers and expect us to still be loyal."