Corporate culture

Fundamentally rethinking Japan’s lifetime employment system

Toyota’s President Akio Toyoda made the headlines in May 2019 by saying that if there are not more incentives to continue employing people, lifetime employment can no longer be maintained. Toyota has still been sticking to the seniority based system common to many Japanese companies where the promotion path is to become kacho (team leader) by 40, then bucho (general manager) in the second half of your 40s. If you drop off this path, there is no return to it. “Which means that if you are in your 50s, with no people reporting to you and no major work to do, it is hard to be motivated, and yet because your salary is Y12m a year (around $110,000), nobody quits” says an employee in his 40s, in a Nikkei Business magazine special feature.

Hidden unemployment

Up until recently, those in their 50s who were in the production side would be taken away from the production line but now, because of a labour shortage, they need to be kept on the production line. So from 2012, Toyota introduced new appraisal systems and health policies, so that those in the 50s can also be productive. The lifetime employment problem is more acute with those in office functions. A Toyota source says “up until the Lehman Shock, they could hide somewhere even if they did not have much work to do, but now the “unemployed layer” is becoming more apparent.”

Toyota has already shrunk its board directors down from 55 to 23 and merged several executive level layers into one. It has been in a series of negotiations with the company union on revising the appraisal system and increasing mid-career hires. Toyota group companies such as Denso, J-TEKT and Aisin are following suit.

“Men in their 50s are inflexible. They are a drag on reform”

Outside Toyota, Hiroaki Nakanishi, now chair of Japanese business federation Keidanren, formerly President of Hitachi has also said that “we have reached a limit to how far a company can run its business on the precondition of lifetime employment”. Electronics companies who developed staff in the 1980s for their semi conductor business are now finding it hard to switch over to AI and other skillsets. “Men in their 50s are inflexible. They are a drag on reform” says the head of a Japanese manufacturer.

Japanese telecoms company KDDI conducted an internal survey to try to revitalise the rapidly growing “over 50s” segment of its workforce, only to find that most of those in their 50s were happy with staying as they were, and had no interest in becoming more energetic in their work. It has not been so much of an issue for Japan’s banks, as there was a tradition of employees in their 50s being transferred to clients. But some clients are beginning to refuse secondees from banks, if they are not adding value.

Fourth time round – a fundamental change is needed

According to Rikkyo University assistant professor Satoshi Tanaka, this is the fourth time round that the middle-senior age group has been a labour issue. The first time was directly after the oil shock in the mid 1970s, the second time was in the mid 1990s, the third was after the Lehman schock. The countermeasure after the oil shock was to second people to sister companies and subsidiaries, the countermeasure in the 1990s was to introduce more performance based HR systems. The Lehman shock aftermath saw more “early retirement” systems (although I saw this being introduced in the 1990s when I was in Japan too) and now the 4th time round, the focus is on how to “revitalise” those in the mid-senior age groups rather than get rid of them, due to Japan’s labour shortage.

Nikkei Business contrasts Japan’s “membership system” with the “job system” of the West. Japan has the three treasures of a company union, seniority based promotion and lifetime employment in contrast to the harsher world of the West, where there are job descriptions, it is easier to fire people and unions are by sector. The consensus fourth time round seems to be that a fundamental rethink of Japan’s HR system is needed.

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The cause of Japan’s low productivity: 5 generalists doing one specialist’s job

In the Nikkei Business series on how to “wake up Japan”, Senior Chairman and former CEO of Japanese leasing and financial services company Orix Yoshihiko Miyauchi sees three mistakes that have led to Japan’s “lost three decades”

Allowing an asset bubble to develop in Japan the first place
Not stabilising the economy after the asset price crash.
Not restructuring the Japanese banking system quicker – real restructuring did not happen until the 2000s, 10 years after the crash.

As a result, Japanese companies were “like tiny boats on a big ocean, using all their energy to avoid large waves. Rather than innovate or grow, they focused on cost cutting”, says Miyauchi.

Miyauchi rates Japanese employees very highly – “they have a strong sense of responsibility, and do all they can to fulfil their obligations. But there is a lack of creative thinkers. There is a problem in the way we develop people – Japanese companies are always developing generalists, when in the future we need to focus intensively on supporting the development of specialists. If you don’t have specialists who are the complete experts, then you cannot achieve high performance. Japanese companies end up having 5 ‘semi professionals’ doing one specialist’s job. ”

“It would be a big shock to change this immediately, so probably Japanese companies will need a hybrid development system with a specialist track and a generalist track.” I agree, but I have seen that in the past when this is done in Japanese companies, the specialist track is seen as a demotion away from line management. Japan may need to introduce specialist, professional organisations such as the various chartered institutes we have in the UK, which certify qualifications and support continuing professional development, to ensure that specialists are less reliant on the prejudices of their company’s HR system for their careers.

No sacred cows for NEC’s President Niino

I was reminiscing a couple of days’ ago with a Japanese business person about how in the 1990s there was a Silicon Glen in Scotland hosting many Japanese electronics and semiconductor factories, including NEC’s semiconductor plant in Livingston. After the IT bubble burst in 2000, most of these plants disappeared, including NEC’s. Silicon Glen has remade itself, focusing more on software and semiconductor design and development. NEC has also reinvigorated its presence in the UK with the acquisition of Northgate Public Services in 2018.

NEC is not out of the woods yet, however. In a tough interview in the Nikkei Business, President Niino seems willing to slaughter several sacred cows and even commits to taking responsibility (presumably by resigning) if his revival plan to FY 2020 does not succeed.

He said he was open to merging with rival Fujitsu, even if it meant the NEC name disappeared. I certainly recognised from his descriptions some similar characteristics in the way they operate.

NEC, like Fujitsu, was part of the so-called Den Den Family, where stable, dependable business came from government contracts from what is now NTT. “Customers would make very stringent requests of us and we would always try to respond with the best possible technical solutions, and deliver 100%. This is an important quality, but you cannot survive globally just on this”.

Niino thinks there were many reasons for the halving of NEC’s turnover since 2000. They had relied on introducing new technology in areas such as semiconductors, PCs and mobile phones, but once these became volume businesses with many newcomers, spending far more on R&D, NEC was no longer able to compete.

Niino is focusing on profit targets rather than turnover and sees NEC’s future strength as being in “safer cities” – using AI and software development rather than hardware. Clearly China will be a major competitor in this, but I guess NEC and other Japanese suppliers will be preferred by many who might view China as a threat.

Niino has brought in an HR director from Microsoft Japan to shake up the HR system. He has appointed 31 “change agents” and made evaluations more visible, and the distinction between specialists and managers more clear. Corporate officers on the board have all been asked to step down temporarily and then are being rehired on 1 year contracts. “I won’t be firing them if they don’t meet targets within one year, but if they miss two years’ running, it might be that they are better off working outside NEC”. As Niino is himself a Corporate Officer, no wonder he has to commit to taking personal responsibility for any failure too.

The enduring Japanese family firm

I attended a Japan Society talk last month on shinise (Japanese family firms) – given by academics Innan Sasaki and Davide Ravasi. Sasaki and Ravasi argued that shinise have survived over 100 years, by keeping small and focused on traditional crafts like sweet making, sake brewing, and textiles. They are very much embedded in the society and community in which they operate – the highest concentration is in Japan’s old capital, Kyoto. In return for their commitment to the local community, they gain a social status and support from the community. They are meant to have a higher moral purpose than pure profit and therefore do not seek to take risks and grow much beyond their current geography and sector – which means they are more resilient to external economic shocks. When downturns happen locally, they survive through the strength of local support. This contrasts with what Sasaki and Ravasi call “instrumental” firms, who exist for a purely economic purpose.

Even large Japanese multinationals behave like Kyoto shinise

Listening to their descriptions of shinise‘s motivations and behaviours, I realised they were very similar to the way I describe bigger, multinational Japanese firms in my seminars. Even though Japanese multinationals have taken the risk to expand overseas, and are often no longer owned by the founding family, the ethos of having a higher moral purpose than shareholder value, of corporate contribution to society and strong risk aversion to ensure longevity still endures.

And like the shinise, the darker side is the sacrifices needed to be regarded as a proper member of the family firm and the difficulty of becoming a senior manager if you were not born into it – or at least recruited straight from university like Japanese headquarter permanent staff.

Nikkei Business magazine had a feature last month on family firms in Japan showcasing research that family owned firms in Japan perform better than non-family owned firms in terms of Return on Assets. “They don’t hold on to unnecessary assets” says Professor Yasuhiro Ochiai of Shizuoka University.

Japanese family owned multinationals that have performed well

DMG Mori is still owned by the Mori family and has been particularly active recently in M&A overseas since the current Mori took over as President in 1999, most notably in their merger with German machine tool manufacturer DMG. Apparently quite a few of DMG Mori’s employees come from the wider “family” of customers and suppliers.

Of course the most famous Japanese company still managed by a founding family member is Toyota. However the current President Akio Toyoda is adamant that the company name is Toyota, the family name is Toyoda, and Toyota is not a Toyoda family company, “it’s everyone’s company.”

Those that are listed on the Tokyo Stock Exchange and also active in Europe were:

Suntory (Torii family – founded by Shinjiro Torii in 1899) – chairman is from the founding family.
Aisin (automotive parts maker in the Toyota group founded in 1949 – chairman is part of the Toyoda founding family)
Shimano (Founded 1921, president is a Shimano)
DIC (Dainippon Ink) founded in 1908 by Kijiro Kawamura, a Kawamura is on the board of directors

And how to avoid toxic family rows

It’s not all joy in a family of course. Nikkei Business also looks at the family rows that have affected the performance of companies like Idemitsu (petroleum company) founding family shareholders fighting a merger with Showa Shell and the rebellion against founding family member Yoichiro Ushioda and chairman by executives of LIXIL (owners of German bathroom fittings company Grohe).

Nikkei Business’s prescription for avoiding trouble is:

Frequent communication between family members
Treat family members who are employees the same way as other employees in terms of company regulations
Don’t withhold information for family only, be transparent in management
Don’t appoint a successor from the family if there is noone suitable
Keep family assets and company assets separate
When there is a generation changeover, keep criticisms to yourself
Avoid too many family members as employees
Ensure a structure is in place to stop family members going rogue

For more on what being a “family” means for Japanese firms and the non-Japanese employees that work for them, this was one of my most popular articles in recent years.

4 cultures of controlling overseas subsidiaries

During a recent trip to Japan I visited Amazon’s offices to have lunch with an acquaintance who has been working there for 1 year and 3 months. He told me that Amazon has expanded so rapidly this past year that he is now in the upper half of a chart which shows all employees ranked by their length of time working for the company.

He also told me that almost all the non-Japanese people working there were, like him, locally hired and that there were hardly any expatriate staff from the US headquarters. I therefore wondered how Amazon HQ could control a subsidiary which is growing so rapidly without any expatriate managers to keep monitor it.

Amazon also tries to minimize the number of processes and procedures it has, in order to maintain the speedy, fast to market, start up mentality it had when it first began over twenty years’ ago.

The 3 usual ways to control overseas operations

In the various multinationals and their subsidiaries I have worked in or with, you can usually find three types of headquarter control. American, sales focused companies tend to control their subsidiaries by setting numerical targets. If the subsidiary employees and managers hit the targets, they get bonuses, if they miss them, they get fired. Many multinationals who are not American in origin use these systems because numbers are easy for everyone to understand, regardless of language.

Another way of managing subsidiaries which both European and American multinationals also use is to ensure compliance through having strong regulations, processes and systems, and clear hierarchical chains of command, so everyone knows who has responsibility and authority for each part of the business.

A third way, which is more common among Japanese companies and also companies such as the German Mittelstand, family owned companies, is “control by the family” – in other words members of the headquarters family are sent out to subsidiaries to monitor what is going on and promote the corporate culture.

Amazon’s way

My Amazon contact explained that Amazon ensures its employees behave in compliance with Amazon’s core values by having a very rigorous hiring process. Candidates are interviewed several times by multiple employees and asked questions about past experiences, to reveal what kind of mindset they have.

I can imagine, however, that it is difficult for Japanese companies to use this method if their overseas subsidiaries were the result of an acquisition, or if the company has already been operating overseas for several decades. There will already be a substantial legacy of staff who may have rather different values and behaviours to those of the Japanese headquarters.

It would also be a mistake, and damaging to the benefits of having diverse, localised operations that are close to their customers, to impose too rigid a set of behaviours and values on all overseas employees.

Nonetheless, I strongly recommend that Japanese companies who are about to acquire or set up operations overseas ensure they have a clear, globally understandable company mission and values (rinen) and hire or promote their overseas employees accordingly.

This article appears in Pernille Rudlin’s latest book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

The good and bad of no longer being “Japan owned”

I’ve been wondering for a while whether Japanese employees of companies such as Sharp or Takata have been feeling any change in corporate culture since being acquired by Taiwanese or Chinese companies and whether those companies could still be considered to be “Japanese”.

Nikkei Business has inteviewed employees from Sharp, Toshiba memory division and also from the laptop division of NEC (now owned by Lenovo) and come up with 13 aspects that have caused difficulties for Japanese employees who have been “bought” (as the Nikkei puts it) and 7 positive effects.

Difficulties:

1. Having to work much harder than before – due to increasing focus on short term profitability – even longer hours than is the norm in Japan.

2. Loss of right to evaluate staff – a sense that Taiwan HQ is now in charge of career development

3. Increase in employees who have a “Taiwan First” mindset

“If you don’t like doing things the Hon Hai way, then start your own business, or go and work for Nidec or Panasonic. If you can’t do that, then suck it up, seems to be their attitude” says one employee.

4. Rigid management by numbers

5. English skills are now compulsory

6. Nemawashi (stakeholder management/consensus) no longer works

7. Large cuts in salary

8. Reduction in autonomy

9. Sudden changes in supplier relationships

10. Reduction in management positions

11. Being posted to unwelcome locations

12. Collapse of succession planning

13. Low capability managers being seconded to your company

Some of the above could happen to any acquired company in any country, but I guess 1, 4, 5, and 6 are particularly acutely felt for Japanese companies acquired by foreign companies.

Some employees saw an upside however:

1. Structural problems are removed

2. Disappearance of bullying bosses

3. Job becomes more fulfilling

4. “Rags to riches” when previously your career history or educational record counted against you

5. Increased salary

6. Improved credit rating

7. More opportunities for promotion

Again many of these are the result of issues arising from having worked for a failing company, and now being owned by a more successful one – but I can see that for many Japanese who were stuck – with their careers blocked by bullying bosses, or considered lower status because of not being a lifetime employee since graduation or not coming from a top university – it is refreshing to be evaluated and promoted purely on ability.

Chipping away at the three treasures of Japanese HR

Several Japanese blue chip companies have announced some quite radical changes to their HR systems, just in time for the new Reiwa era. The so called three treasures of lifetime employment, seniority based pay and a company union have been looking a little tarnished for some years now. They seem a legacy not even of the Heisei era but of the post war Showa era of a booming economy and a need to retain a young workforce.

Hitachi had shown the way four years ago (as described in our blog post at the time), abolishing seniority based pay for its managers and replacing it with pay based on job roles. They have made further waves recently with the announcement of the first ever Hitachi subsidiary President to be in their forties. The newly formed Hitachi Global Life Solutions will be led by Jun Taniguchi, born in 1972.

Hitachi claim that this new system is needed for the company to be truly global and able to appoint and transfer managers around the world, regardless of where they were recruited. Beer and soft drink manufacturer Asahi Group Holdings has also been shifting to global standards. Around half their employees are non-Japanese, as a result of their acquisitions of European brands such as Peroni, Grolsch and Fullers. They have said their Presidents and CEOs will be evaluated on return on equity from now on, and given the boot if it is not maintained above 13%.

Japanese megabank MUFG says it will reduce new hires in Japan by 45% to 530 next spring, and will cut the 6000 employees in its Tokyo headquarters by half. Not all Japanese HR traditions are being thrown out of the window, however, as the surplus 3000 will not be made redundant, but rather redeployed to sales functions or sent overseas to areas where MUFG is expanding like the USA and Asia (but not it seems, Europe). MUFG is automating the functions that these staff performed, as well as cutting many of its retail branches in Japan. It will instead be beefing up its overseas compliance and digital payment systems divisions.

Some Japanese politicians and commentators have said that the “rei” of Reiwa sounds rather cold, as it can sometimes mean “order” or “command”. It also, when combined with the radical for water, becomes a character meaning chilly or freezing. It certainly feels like some icy winds will be blasting through Japanese cosy HR traditions in the new era.

Five elements of building trust between Japanese and European business cultures

If I were to capture what I try to do in my work in one phrase, it would be “build trust between Japanese and European business cultures.” This of course leads to questions of how trust is defined, and therefore how it is built.

The title of my new book, Shinrai, is the Japanese word for “trust”. It is composed of two characters, shin, meaning “believe”, and rai, which means “to request”. In other words, if you trust someone, you believe they will do what you request. The character for shin can be broken down further into components which mean “person” and “word” and the character for rai can be broken down into “bundle” and “leaves or pages”. It implies communication between people is a fundamental part of building trust, but also getting things done and pulling together.

Analysing the work I have done with clients over the past fifteen years, I would say there are five components of building trust in multinational companies. In sequential order they are communication, mutual interests, processes and regulations, reliability and accountability and vision and values – and then back to communication again in a virtuous circle.

1. Communication

Having a common language is critical – this is why any initiative to help immigrants integrate into a society usually starts with language lessons. The problem for Japan is that for native speakers of European languages, Japanese is one of the most difficult languages to learn and Japanese feel similarly about English. Japanese companies can do more to help Westerners learn Japanese – an intensive course in Japan is one of the most effective ways to do this. Japanese companies can also communicate better than they do in English – it’s not enough to make English the common language or force a minimum English level on employees, management needs to communicate vision, strategy and plans in English more effectively than it currently does.

2. Mutual interests

The Economic Partnership Agreement between Japan and the EU is a classic example of common interests helping to build trust. People have differing degrees of interests, but finding mutual interests means that there is a stable basis for negotiation. Japan wants to sell more cars in Europe, European consumers are happy to have cheaper, good quality Japanese cars. Europe wants to sell more food and drink to Japan, Japanese consumers are happy to have cheaper, good quality European wine and cheese. On a micro level, this is why I always encourage Japanese expatriates in Europe to engage in small talk with their European colleagues – it’s a way of discovering mutual interests, which means mutual understanding, compromises and agreements are more easily gained.

3. Processes and regulations

Once you have discovered your mutual interests, you can come to an agreement, but it needs mutually recognised standards to work well. What are the quality and safety standards expected of a car, or a cheese in your respective countries?

When there is a low level of trust, laws, regulations and processes are needed as a fall back. However, both Japanese companies and the European Union are sometimes guilty of becoming bogged down in bureaucracy and process. You have to show you are obeying regulations and following processes in order to be trusted, but ultimately, this is not sufficient. How you do something in terms of your intentions and behaviour towards others is as important as carrying out the process correctly and obeying the law.

4. Reliability & accountability

When you trust someone, it is not only because you believe they will obey the law, but also that they will do what they say they will do. For Japanese companies, this can be hard to define, as the culture is often a family style one, where everyone’s roles are vague, with no job descriptions and rely on a seniority-based hierarchy. It’s assumed everyone will do whatever necessary, in the best interests of the family. Rules can be bent for family members but this vagueness does not work well in more diverse organisations.

The current fight between Carlos Ghosn and Nissan is focused on processes and regulations. Nissan will try to prove Ghosn flouted Japanese law, but will have to answer questions about its own internal rules. Ghosn will try to prove that he followed both internal and external regulations. But what really seems to be at stake is a loss of mutual trust between Saikawa and other Japanese executives and Ghosn. If you are an insider in a Japanese company, you are trusted as a family member to act in the best interests of the family, and rules can be bent accordingly. But once you are seen as an outsider and acting in your own interests, possibly harming the company, then the rules are applied rigidly – just as the UK is finding out as it negotiates to leave the EU.

5. Vision & Values

This is why you need a clear vision of where the company is going and how you want it to be seen. The vision and values have to be discussed with and shared with employees so they feel they belong. The values will guide them as to how they should behave in order to achieve that vision. If the vision is simply to hit various targets, within the boundaries of rigid rules and processes, without employees engaged with the company values, then the kinds of corporate scandals we have seen in both Japanese and European companies will continue, with catastrophic consequences for trust across societies and cultures.

This article is in the introduction of “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” by Pernille Rudlin, available on Amazon as a paperback and ebook.

The skills shortage in Europe

Seven in ten British employers have been having difficulties in filling vacancies, and 40% say it has become harder over the past year to find the staff they need, according to a 2018 survey of 1000 companies by the Chartered Institute of Personnel Development and Adecco, a staffing company.

The situation has been exacerbated by Brexit. The numbers of workers born abroad in Britain fell by 58,000 year on year, whereas it had increased 263,000 over the previous 12-month period. This was mainly due to a drop in the number of workers coming to the UK from the EU.

It’s not just a UK problem, however. According to a JETRO survey at the end of 2017, “securing human resources” was the number one operational challenge for Japanese companies in Europe. This includes Germany, the Netherlands and even Central and Eastern European countries such as Hungary and the Czech Republic.

So how can Japanese companies compete with local employers chasing the same skilled workforce?

I like to use a model developed by Fons Trompenaars and Charles Hampden-Turner to explain to Japanese companies where they can win as an employee brand.[1] It’s a matrix, based on degree of hierarchy and degree of task versus relationship orientation, resulting in four corporate cultures – the Guided Missile, The Eiffel Tower, the Incubator and the Family.

Guided Missiles are typical American, sales-oriented organisations where the employees are motivated by targets, achievement and reward.

The Eiffel Tower organisation is more hierarchical, focused on structure. People are motivated by their status in the organisational hierarchy and promises of promotion.

Many people in Europe are used to the Eiffel Tower style of company and when they join a Japanese company, they are concerned by the lack of defined paths to progress their career and also an absence of clear, strategic direction.

Other Europeans, particularly in the R&D, creative, IT, design engineering sectors, are more used to the Incubator type of company. Here the main motivation is not money or status, but rather developing and using one’s skills to innovate.

Most Japanese companies belong to the Family style company. Employees want to contribute to the longevity and good reputation of the family, as a respected family member. It is difficult for Family style companies to motivate employees with money or status, as these are dependent on seniority, rather than performance.

Japanese companies in Europe have a reputation for good benefits, but only average pay. There is also a sense that there is a limit to how far you can be promoted if you are not Japanese, in other words, a family member.

Japanese companies are appealing to Europeans because they are “different” and “interesting” and also because they are seen as good corporate citizens. But Europeans also need to be made to feel it is possible to become a family member, by helping them understand the company’s vision and values – including through secondments to Japan headquarters – if you want to retain them.

[1]Riding the Waves of Culture: Understanding Cultural Diversity in Business, Fons Trompenaars & Charles Hampden Turner, (Nicholas Brearley: 2003), 159

The original version of this article can be found in “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

What role did Carlos Ghosn’s status as a foreigner have in terms of his downfall?

And what does this mean for any other foreigner leading or looking to reach the top of a Japanese company? Obviously the Nissan story is evolving hour by hour, so what follows is based on my current understanding as of 20th November 2018.

The specific accusations are that Carlos Ghosn received share price-related compensation and the Dutch holding company of which he was a director along with Greg Kelly, as part of the Nissan-Renault alliance, used its funds to acquire and refurbish houses which were his residences. These were not declared, not as an income tax issue, but as a fiduciary/governance issue, in terms of declarations to the Japanese securities and exchange commission.

Is the way this possible misuse of funds was exposed specifically because Ghosn was not Japanese? Actually a lot of Japanese Presidents and Chairmen are allowed to use company funds for personal reasons, and because of the blurring of personal/private and employer in Japanese companies, it is quite common for companies to provide housing and other benefits far beyond the norm in the West, particularly to senior executives, who are not, on paper, paid that well. This is particularly true of companies where the President is also the founder or has a high degree of autonomy.

Terrie Lloyd, a long term resident and entrepreneur in Japan wrote an interesting piece on this recently – https://www.terrielloyd.com/terries-take/tt-970-imploding-one-man-shacho-listed-companies-e-biz-news-from-japan/

You also can’t help wondering what had been going on over the years in terms of internal checks and corporate governance at Nissan if they did not know and challenge what kind of “benefits” and compensation Ghosn was getting – as illustrated by this blog post from a Japanese corporate insider https://bdti.or.jp/en/blog/en/nissanltr/?77

So the next question is, as it often is with Japanese corporate scandals, why is this particular accusation being exposed and why now? The official story is that it was made by a whistleblower, which necessitated an internal investigation, and then this led to a plea bargain which would reduce the penalties to Nissan.* There is only one other instance of this happening – with Mitsubishi Hitachi Power Systems and a Thai bribery case – and it was a Japanese manager who was involved.

But I suspect, as do other analysts, that Nissan chose to pursue this and publicly expose it because they didn’t like the direction Ghosn was taking the company in and couldn’t work out another way to get rid of him. There was undoubtedly a long running worry about the degree of control/interference by Renault and the French government and Ghosn’s intention to make the alliance irreversible by the time he finally stepped down in 2022. I also just read a story in the Nikkei Business magazine that Ghosn was very keen for the alliance to partner with Google, Microsoft and Daimler and Chinese companies to create a CASE (Connected, Autonomous, Shared, Electric) strategy. That degree of “foreignness” and with the US, and China, and Daimler with whom Mitsubishi Motors already had a failed alliance might have elicited an allergic reaction from Japanese executives at Nissan and Mitsubishi Motors.

But also, which accounts for the strong words from current President Saikawa, indulgence of senior executives is tolerated so long as they still seem to be working for the good of the company, and Ghosn not turning up for the public apology after the inspection scandal, and the sense that it was his corporate culture of imposing aggressive targets on employees that might have caused that scandal – and yet he blamed Saikawa, might have tipped Nissan executives further into exposing the issue publicly rather than dealing with it in the usual way.

The usual way (see Fujitsu/President Nozoe resignation in 2009), when other executives decide that a President has to go sooner than the usual carousel of 6 years as President and another 6 years as Chairman because they think he’s gone beyond what is morally acceptable and/or they don’t like his strategy, is that they try to let the executive exit honourably, by getting him to resign due to illness or some similar blamefree excuse.

Maybe this option was offered to Ghosn – who had after all been leading Nissan as President and Chairman for nearly 20 years, so way beyond the norm for Japan. But I can imagine that he refused it – and this could be attributed to him being “foreign” – instead of understanding Japan’s “shame” culture, he would have gone down the Judaeo-Christian and legalistic route of saying he had a contract until 2022 and as far as he was concerned he had done nothing wrong, innocent until proven guilty, so bring it on.

There may also be a political aspect – again nothing specifically to do with Ghosn being foreign – but Nissan may have got the hint from Japanese government agencies that they would be supported in taking Ghosn down because they were not politically in favour of the direction he was taking the alliance in – see what happened to Horiemon/Livedoor.

So in summary, I doubt Ghosn was treated differently because he was foreign per se, but because he was foreign he probably reacted differently, just as Michael Woodford did when asked to resign after uncovering scandals at Olympus, believing his own innocence and not fearing public exposure.

But underlying this there could be a resistance in Nissan and beyond, to any further globalizing, whether it results in French or Chinese or American or German control or influence. If I was a foreign executive, particularly if I was Christophe Weber at Takeda, I would be watching further developments in this case like a hawk and making sure I built as many strong, trusting relationships with my Japanese executives as possible.

*The story has indeed evolved – it now turns out that Nissan itself was not part of the plea bargaining deal, it was the two officials, one non-Japanese SVP who managed the Dutch subsidiary and one Japanese who was Ghosn’s chief of staff, who agreed to cooperate with the investigation under a plea bargain.

I was also quoted in the New York Times on this subject.

Category: Corporate culture