Carlos Ghosh (64) was the CEO of three international auto corporations, Renault, Nissan and Mitsubishi Motor. He was arrested in Japan on November 19, 2018 at the Haneda airport, when he was flying in his private Gulf Stream jet to Japan to attend a board meeting where he was going to call for a vote to remove the CEO he promoted, Horton Saikawa and reinstate his aide Kelly. He was arrested on the grounds of false accounting and his close aide, Greg Kelly, a retired Director and former head of Human Resources, was also detained. Ghosn was allowed to stay in his Tokyo apartment with a hefty bail $13.8 M. The news of Ghosn’s arrest was very significant in business world in 2018 but his Hollywood style escape from Japan under heavy surveillance on the day before New Year Eve (12-30-2019) was mysterious and dramatic, not surprisingly appeared on headlines on most world-wide media. Although Ghosn’s escape plot is an intrigue story involving a former American Green Beret, Michael Taylor, deserving media’s and readers’ attention, but his career peaked as an CEO of multiple international corporations simultaneously tells more than an CEO’s greed and power as presented by the Japanese prosecutors. Ghosn’s case clearly demonstrated the problems of global corporate governance, executive compensation, employee protection, and cultural clash under different political systems and business philosophies. Thus, it is worthwhile for us to trace beyond Ghosn’s personal successful career and his intriguing escape from Japan to Lebanon (now an Interpol wanted man) to launch a discussion on some of the larger issues mentioned above.
Ghosn was born in Porto Velho, Rondonia, Brazil (1954) and moved to Rio de Janeiro in 1956 then returned to Lebanon at six with his family. He was educated in Lebanon and later studied in France at prestigious Lycee Saint-Louis and the Ecole Polytechnique to become an engineer. He started his career in tire business and worked his way up in Michelin, becoming its COO of South America at age of 30 returning Michelin-SA to profit. With effort in mastering English, he then became the COO of North America for Michelin in 1989 and CEO in 1990 overseeing the restructuring after Michelin acquired Uniroyal Goodrich Tyre Company. The Ghosns lived in Greenville, North Carolina. In 1996, Ghosn became the Executive VP of Renault’s Research, Engineering and Manufacturing and President of its South America Division and in a year he became the first CEO of the privatized Renault with a successful restructuring operation. In March 1999, Renault and Nissan formed an alliance, then Renault purchased 36.8% of Nissan (May 19999) Ghosn as CEO of Renault assumed COO of Nissan (6/1999) and became President in June 2000 and CEO in June 2001 after successfully accomplished a Nissan Revival Plan (achieved profitability of 4.5% and debt reduction from $5.6B to $2.76B) by cutting 21,000 jobs (14% in Japan), eliminating age/seniority promotion, abolish Nissan Suppliers crosslink relationship (earned him a nick name as keiretsu killer), and changed corporate language from Japanese to English. Nissan returned to profit and debt was reduced to half. Then Ghosn introduced the 180 plan (1 million vehicles, 8% profit and 0 debt) to be accomplished by 2005, which were all being met under his leadership.
Ghosn’s success drew attention in the auto industry. Billionaire investor Kirk Kerkorian bought 9.8% of GM in 2005 with intention to get Ghosn to be the new CEO but the plan was rebuffed by the GM Board. Next year, Ford offered CEO to Ghosn but he refused for not getting both the Chairman and the CEO positions. In the mean time, Ghosn embarked a push for zero emission vehicles and made Nissan as the world leader in electric cars, twice as big as Tesla’s sales in 2017. Renault invested in Russia AvtoVAZ and bought 25% share, Ghosn became chairman of AvtoVAZ from 6/2012 to 6/2016 making him the chief of several international corporations including two in the Fortune 500 list. In October 2016, Nissan bought 34% of Mitsubishi Motors, which later chaired, making the alliance group to be the 4th world largest auto group next to Toyota, Volkswagen and General Motors. Ghosn was the 4th foreigners to be CEO of a Japanese company (the other three were appointed by Ford to run Mazda). While Ghosn was successful in restructuring, his actions certainly have irked other Japanese corporate executives and employees as well as challenged some Japanese social and cultural norms. These elements probably brought his demise. Ghosn did announce in February 2017 his plan of stepping down from Nissan CEO position as of 4/1/2017 but remaining as Chairman and promoting his protege, Horton Saikawa, to be the CEO. However, Ghosn was removed from his Nissan Chairman position as of November 26, 2018.
The charges made against Ghosn by Nissan and the Japanese prosecutors included using Nissan funds ($18M) for purchasing his residences in Paris ($5M), Beirut, Amsterdam and Rio de Janeiro ($15M), setting up shell companies in Netherlands for making investments with Nissan funds, under reporting of income with complicated deferred income payment schemes and various financial accounting problems. Ghosn till this day claim innocence, however, he did settle with the U.S. SEC to pay $1M fine for failing to report $140M Nissan pay barring him to serve as director for any US public company. Ghosn’s lavish life style and a salary equal to 240 times of that of a Renault employee and 11 times of that of Toyota chairman illustrate a fundamental issue in applying the American corporate culture to Japan and China. China and Japan both have a legitimate corporation law in many ways similar to the Western system but what is different is how these laws operate in the Asian societies with their unique political system and cultural background. Japan is not a communist country but she has a similar philosophy regarding protecting jobs and employees like China does.
We should not look at Ghosn’s case as a simple personal greed or financial accounting fraud case. When Ghosn cut 21000 jobs (3000 in Japan) and abolished lifetime employment system in Renault-Nissan, he should have realized that he was challenging the Japanese culture and its society. Changing corporate language from Japanese to English not only will not educate the Japanese to accept the Western business philosophy but will further increase resentment of the Japanese employees. Calling Nissan’s action against Ghosn as treason or coup or jealousy or corruption is a gross simplification of the deep problems existed in the international conglomerates operating world-wide especially in Asia, South America and Africa. As China is rising as a giant economy trying to establish and manage her global corporations as Japan did in the past decades facing competition with American corporations, it is advisable for the U.S., Japan and China to take the Ghosn career as a case study to examine the deep issues of corporate governance for global conglomerates. Perhaps, the young successful Conglomerate, Huawei, should be used as a reference for such a study.