Lessons from the Ghosn affair

Ghosn lessons

It is difficult to overstate the sense of scandal that has accompanied the revelations that Carlos Ghosn, chairman of Nissan, has been accused of significant acts of misconduct.

Mr Ghosn has virtual cult-hero status in Japan for reviving Nissan, and he is the lynch pin in the alliance Renault-Nissan-Mitsubishi Motors, where he is both CEO and Chairman, as well as being CEO of Renault.

The allegations span many years and include understating his Nissan earnings to the stockmarket and the misuse of company assets. It is early days and this saga is likely to run, but we can already draw some lessons from a governance and compliance perspective.

Firstly, it is not all bad. The alleged wrongdoing was uncovered by a whistleblower, subsequently followed up by a lengthy and extensive internal investigation. Having received the full investigative report, the company seems to have acted decisively and transparently against someone at the most senior level.

Clearly, the company has systems and processes that can respond to individual transgressions. But very few such transgressions are purely anomalies. Why did the board and shareholders not ask more questions about potential conflicts as Mr Ghosn accumulated more power, when he took on chairman and CEO roles across major auto businesses?

And then the question must be asked: how clear are the company’s policies when it comes to the use and misuse of company assets by employees? It is common that Asian executives tend to be paid less than their Western counterparts on the implicit understanding that they have greater license to use company resources. Has this become too much of a grey area?

When assessing the cause of unethical executive behaviour, it is necessary to conduct a root-and-branch analysis. Such events are very rarely solely caused by the actions of a few unscrupulous individuals. They tend to be the result of multiple institutional, process-related and cultural failings. Now that the internal investigation in to Ghosn is complete, it is a good time to broaden the analysis to the corporate policy environment under which the allegations took place.

Credit: Kremlin | Monday, 26th November 2018

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