2 minute read

Carlos Ghosn was once a legend of the automotive world, pulling Nissan back from the grave to become one of the world’s most iconic brands. In an economically battered 1990s Japan, Ghosn became a kind of folk hero, a symbol of hope and restoration. With his brash personality and stylish character combined with his skill for streamlining business operations, he quickly rose to celebrity status, even being drawn into Japanese comic books. In-step with his larger-than-life presence, he was the chairman for Renault, Nissan, and Mitsubishi Motors simultaneously.

That all came crashing down when it was discovered he’d been underreporting $44 million in income and misappropriating company funds from Nissan. Although it has been debated that the publicity of the scandal could be part of an internal coup d’état to separate Nissan from Renault, Ghosn has been lambasted by Nissan’s CEO (who Ghosn himself hand-picked), calling on the board to remove him as chairman.

Scandals like this aren’t uncommon – but what is surprising is how Nissan’s CEO and board of directors reacted to his crimes by immediately, and publicly, turning on him.
Contrast this with Steve Jobs’ options backdating scandal, where Apple’s General Council took the fall for Jobs, or Elon Musk promoting a fraudulent $420-per-share private sale with minimal backlash from Tesla, or the absence of charges against any executives of Kobe Steel when they lied to customers about their quality data. What makes Ghosn so different that his board would immediately oust him? Could be this be an example of ethics and good governance on behalf of the board?

Although this could be a case of good governance in action, it may be difficult for critics to imagine that an active, engaged board would not be aware of Ghosn’s illegal activities, which were taking place since at least 2010. However, the problem may lie with boards themselves. It has been suggested by researchers that boards are ineffective at their monitoring duties due to the principal-agent problem, knowledge barriers, management tactics, time demands of their other jobs, firm complexity, and a culture of deference. Echoing the ideas of our founder, Mac Van Wielingen, there is an imperative need fordirectors to become more active and more assertive with corporate governance, or we can expect to see more cases like Ghosn’s and corruption continue to thrive.

This work has been funded by Viewpoint Foundation.