On November 19, 2018, I was watching NHK Japanese news as the story unfolded about the surprise arrest of global business leader Carlos Ghosn. There he was, the charismatic Chairman of Nissan, Renault, and Mitsubishi Motors—a man I’d followed and often held up as the quintessential cross-cultural leadership success story in Japan—his Gulfstream jet surrounded by prosecutors who had been lying in wait at Haneda Airport near Tokyo.
One of the world’s highest-profile sting operations, it was long in the making, with cooperation from Nissan insiders. There were no police officers on the scene. Tokyo prosecutors boarded the plane to make the arrest and to whisk Ghosn off to detention as the media filmed all (they’d been tipped off). He wasn’t even allowed to make a phone call to his daughter, who was waiting for his arrival at his Tokyo corporate apartment in the famous Mori Building. She found out by indirect tweet and just barely before the 15 dark-suited investigators showed up at her genkan (doorstep) to search the apartment for six-and-a-half hours.
The anticipated financial misconduct charges so far appear to be three-fold: multiple years of underreporting his income (reporting $50 million instead of $90 million), using company investment money for his own purposes, and expensing private activities to the company. He had help from another employee to set up a company in Europe to manage his corporate global properties—or was it to take them off the books? In short, he was making a lot of money, using company funds for his own purposes, and trying to hide this fact. What global business mogul hasn’t at least tried to do that? His nefarious practices apparently have been going on for years, but Ghosn held all the cards at all three companies, so no one at Nissan, Renault or Mitsubishi could question his actions or stop him. As one Japanese executive put it, Ghosn was “above the clouds” meaning out of reach and practically untouchable.
But how did it all unravel for him—and why now? Beyond his financial shenanigans, is one of his “crimes” that he is a bold foreigner, and seems unable or unwilling to fit a mold more typical of business leaders in Japan? In working across cultures, did he require others to bend to his cultural values?
Seen as a quintessential multicultural businessman, Ghosn (rhymes with “throne”) was born in Brazil, raised in Lebanon and educated in France, where his automotive career first flourished. In his tenure as VP at automaker Renault, he is credited with turning the company and its brand around. In 1999, Renault bought a large stake at struggling Nissan Motors, and so sent their best turnaround man to Japan. Could a “gaijin” (outsider, or foreigner) make it as a cross-cultural business leader in Japan? Most analysts believed he would fail as a gaijin boss in Japan. According to the New York Times, Bob Lutz of GM quipped at the time that Renault would be better off “taking $5 billion [Renault’s investment in Nissan], putting it on a barge and sinking it in the middle of the ocean.”
Undeterred, Ghosn showed up and made a big splash as “Le Cost Killer” who closed factories, slashed suppliers and laid off at least 20,000 workers. Within six years Nissan shot up to become Japan’s number two automaker, just behind Toyota. Nissan even became a major player in the US market. Ghosn was the first ever foreign Businessman of the Year in Japan, was designated as a National Treasure, and became the first foreigner to receive a Blue Ribbon Medal from the Emperor himself. There was an inspiring manga (Japanese comic book) made of his life. I even read somewhere that the Ghosn family’s favorite TV show was “Game of Thrones,” which they had aptly (and perhaps ironically) renamed “Game of Ghosns.”
The Nail That Sticks Up Will Get Hammered Down
There is a common-sense maxim in Japan that states “The nail that sticks up will get hammered down.” This saying is a reflection of many aspects of Japanese culture that have kept the country intact and allowed it to thrive for thousands of years: harmony, collectivism, hierarchy, “kata” or the (right) way of doing things, fitting in rather than standing out, conforming to group norms as a way to maintain stability.
It is the opposite of what people in the US would call individualism, where “the squeaky wheel gets the grease.” If an individual has the best idea or is the best leader, then that individual deserves to be recognized and rewarded accordingly. Materialism at it’s finest. We don’t necessarily resent Jeff Bezos or Mark Zuckerberg because of the obscene amounts of money they make; we would like to BE the next Zuckerberg or Bezos.
But in Japan, equality is equality of treatment, not necessarily of opportunity. Ghosn’s downfall may well be in part because he was a such a brash standout that it became too much to bear for Japanese society. While he had miraculously turned around a struggling car maker and proceeded to strategically create the improbable triangular alliance between Nissan, Renault, and Mitsubishi Motors, he also used his position to consolidate and take all decision-making power into his own hands. Other Nissan executives grew increasingly frustrated with the lack of consensus, and the “black box” nature of Ghosn’s go-it-alone decisions. This was probably where the evidence-gathering begin.
At the heart of Ghosn’s problems has been his outsized paycheck, by Japanese standards. CEOs in Japan typically earn at a ratio that is around 11 times the average worker. That ratio in the US is closer to 475 times. In 2017, Ghosn’s salary was reported as $16.9 million ($8.4 million from Renault, $6.5 million from Nissan and $2 million from Mitsubishi). While it may be well below what GM CEO Mary Barra received ($21.96 million), for comparison, it happens to be 11 times more than the salary of the chairman of Toyota, the biggest carmaker in the world. Nissan had even attempted to put a cap on the combined pay of board members, but Ghosn went around them to appeal directly to shareholders and the media.
Ghosn had always defended himself by saying that no other CEO of any major global company would say that Ghosn was overcompensated. He was a strong proponent of having a compensation policy that would attract the best management talent in the auto industry.
The Real-Life Game of Ghosn
Stories of Ghosn excesses are part of his lore. Most relevant to the case were multiple corporate-paid luxury condominiums around the globe, in cities like Tokyo, Rio, Beirut and Paris. He drove a top-of-the-line Porsche around Tokyo. Why not a Nissan? So disloyal! Another cultural strike against him. There are many examples of Ghosn extravagances, but none more so than when he remarried in 2017 at the age of 62 and held a lavish, over-the-top Marie Antoinette-themed wedding reception at Versailles Palace in France. Renault is a quasi-government-run company, so we can assume he had good connections. Ghosn looked like a man committing perhaps the gravest sin of all in Japan: He was greedy. Japanese people have a low tolerance for the one person who seems to have an unfair advantage over the rest, especially if he or she unapologetically flaunts it.
While the country was shocked by the sudden arrest, it wasn’t long before the gripes resurfaced about his laying off 20,000, as did talk of resentment about his excessive power and income. The nail was sticking up too high, and it was high time to take it down. Taking down someone with so much power would seem next to impossible. But the legal system works very differently in Japan compared with countries like the US. Most cases are handled out of court, or more accurately person-to-person with no court involvement whatsoever. There are far fewer lawyers per capita in Japan, and trial by jury has only recently been introduced. Prosecutors wield all the power, and almost all arrests end in some kind of sentencing. It’s not about the individual seeking justice. It’s about sticking to the known rule of law.
It’s been nearly two months since Ghosn’s arrest. He is still locked up in a rather bare and somewhat chilly detention center, with daily interrogations, and is not allowed to so much as make a call, use a writing pad or turn out the lights. Ghosn has declared his innocence repeatedly. The courts, meanwhile, keep finding new crimes to use as justification to extend his detention. They believe he’s a flight risk, and they certainly don’t want him to “tell his story” to anyone, especially as an appeal to other Nissan executives and employees.
Does the punishment fit the crime? Has Carlos Ghosn’s hyper-successful cross-cultural leadership star faded? Has his outsized personality finally caught up with his business role in more subdued Japan? Stay tuned. The plot thickens, and yes, winter is here for Carlos Ghosn.