Category: Corporate Governance

Why rising stars quit their Japanese companies

Myth 1. Young Japanese aren’t loyal to their employers

“They just use the company as a stepping stone”

Japanese companies have been worrying for a while now that young people are job hopping far more than previous generations. A Mynavi survey shows that only 22% of graduate recruits starting work in 2019 said they would be interested in staying at their company until retirement, 8% for over 10 years, 10% 6 to 10 years, 15% 4-5 years, 22% up to 3 years and 24% were “not sure”.

According to Nikkei Business, in their special feature on the myths of why young people quit, the reality is that because young Japanese people like the company they chose, they can’t bear to watch it decline. The Nikkei gives an example of an anonymous new graduate recruit who left her company after 3 years.  She had studied abroad, had good language and communication skills and a strong interest in human resources. She thought working for a Japanese manufacturer had a romantic appeal, and the HR department wooed her heavily. Her reasons for quitting were that the general manager level was resistant to change, and when a new President took over, the direction of the company turned 180 degrees, making her worry about the lack of corporate governance.

Myth 2 Young Japanese lack perseverance

“They immediately complain when work gets tough”

The Nikkei points to a survey of managers of people in their 20s and early 30s which discovered that most managers thought that a much higher proportion of their team were proactive and willing to take up challenges than were not.

If anything, it’s the bosses who do not persevere, says Nikkei Business. They cite a young employee who quit a major insurance company in 2019 after 4 years who said that he was was highly motivated by tough challenges. He had looked forward to putting his energies into sales, but was repelled by how his boss – who took no responsibility and only thought about promotion – was so well evaluated.

Myth 3 Young Japanese quit because their pay is too low

“They prioritise pay because they are worried about their future”

A survey by Japan Net Bank in 2017 showed that 21% of 18-25 year olds did not expect to earn more than their parents over their lifetime, and 43% thought it was unlikely that they would do so.

Nikkei Business comments that the key concern of young Japanese employees is whether their job has meaning, and is of value.  It quotes a young bank employee who thought that by working for a regional bank, he could support local businesses. However he did not see the point of the products he was selling and his request to transfer to a different department was refused. So he quit after  7 years.

Myth 4 Young Japanese quit out of youthful impetuosity

“They don’t have any responsibilities, so they quit on impulse”

It is true that Japanese are marrying later than before (75% of men are unmarried at 29, over 60% of women), so family responsibilities do not weigh so heavily on people in their 20s. “If I think about my future, I care more about how I am valued outside of the company than inside” says one high flier who quit a very prestigious trading company job. He had hoped to use his corporate finance and accounting skills and venture capital experience to help people in emerging markets. However he was placed in a division which did not make use of his expertise and was unexpectedly asked to transfer to another area.

Myth 5 Young Japanese quit because of too much overtime

“They want to have an easy life and hate overtime”

“I’m happy to do overtime, if I feel it’s adding value to the world” says a young Japanese rising star who quit her company after 2 years. She thought the company seemed very diverse and liked the way board level directors were involved in recruitment. However after an exhausting worklife, she felt she would be better in a job where she really felt she was contributing to society.

It’s hard to see any major cultural difference or something uniquely Japanese about this mismatch. I have vague memories of similar frustrations and worries when I was a young person thinking about joining a big multinational organisation after university 30+ years’ ago.

The dangers of going for the obvious solutions

The second part of this feature goes on to look at what Japanese companies could do to improve retention, and points out that the tactics that are usually proposed may be mistaken.

For example, thinking that there should be more 1:1 meetings between younger staff and their bosses could just increase frustration, if nothing is done as a result of the meetings. Having a system whereby young staff can request transfers is also pointless if the transfer is not approved, and often the dissatisfactions continue even in the new role. Internal commendations can also feel hollow, mentors often fail to turn up for mentoring meetings and simple pay rises don’t address key concerns about personal development either. Talking up the bright future of the company can also seem like just so much hot air.

More innovative approaches to retention

Nikkei Business recommends more innovative approaches, to address the fundamental reasons young people leave their companies.  They point out that even good contributors, or employees who were reasonably happy in their work quit their employers, for reasons which are more to do with wanting to expand horizons, develop specialist knowledge or skills, or to have a job which better fits their lifestyle.

One recommended approach is to transfer young people abroad, or to more challenging environments.  I would add a note of caution here, which is that I have often seen young people enjoying the freedom and challenge of living abroad, and then not wanting to return to their traditional Japan HQ, and quitting.  Nikkei Business also suggests an “intermediate” mentor – closer to the junior employee in age and seniority, who acts as a go-between with the more senior mentor.  Finally they recommend using AI to understand the motivations and fit of the person with various job roles.

I would add to this that Japanese companies might need to consider setting up continuing professional development associations similar to the ones we have in the UK – whereby members advance through a professional hierarchy through self study and examinations, in professions such as HR, accounting, finance, IT etc. Then, even if the company cannot offer them roles which have an instant career development impact, young employees can gain satisfaction from developing their knowledge and skills, supported by their employer.

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Japanese companies need to add professional accountability to their corporate governance

When the topic of meaningless meetings in Japanese companies comes up in my training workshops, I often tell the story of how I once had to attend a meeting in the Japanese headquarters of the company I was working for, as the representative of the corporate planning department, on a topic I knew nothing about.  I was told to read the ringisho and not say anything, except for “ryōkai” (understood, agreed) at the end. “It was two hours of my life I will never get back.  The two people in charge of setting up a loss-making factory simply read out the ringisho (circular memo for making a decision) line by line and then asked for approval to write off several hundred million yen.  This had been approved already, so obviously we just said yes. I still don’t know to this day what the meeting was for – perhaps it was a kind of punishment”.

Japanese companies have internal accountability

On reflection, I think it was about ensuring internal accountability – to give an account of decisions made, actions taken and the reasons behind them.  Most Japanese companies have these kinds of mechanisms for internal accountability and their executives are also expected to be accountable to Japanese society for any failures, hence the succession of shazai (deep bowing to apologise) rituals we have seen recently.

There is a missing piece though, both in the recent Japanese corporate scandals and also the sexual harassment revelations in the Western media and entertainment industry, which is professional accountability.  As Japanese companies globalize and diversify their workforce, I believe they will have to add this piece to their corporate governance and compliance systems.

A wide range of professions in the West, from traditional professions such as law, medicine and accountancy through to newer professions such as HR, banking or engineering all have associations to which professionals are expected to belong if they want to practice.  They sign up to a set of ethics and regulations and are expected to take exams in order to progress through a series of grades and also undertake a certain number of hours of professional development every year. 

Professional qualifications help diversity

Although it has proven tricky to get mutual recognition across countries of professional qualifications, it does help companies build a diverse workforce because they can be “blind” to the gender, age, disability or ethnicity of the person they are hiring, if they have the necessary professional qualifications.

Japanese companies will find it easier to ensure accountability internally and externally when they operate overseas if they employ professionals.  Employees who have professional accountability know they will lose their professional status if they do not abide by ethical and regulatory standards, and this gives them the strength to resist any unethical pressure that is put on them by their bosses or customers.

Ensuring accountability is a two-way process, however.  Although employees will be accountable internally and to their professional association, their bosses will still be accountable internally and externally for their subordinates’ behaviour.  This means that bosses must enable an environment of trust, achievable targets and adequate resources.

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.

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I love Japan but I don’t want to work in a Japanese company

I’ve done a screencast (around 11 minutes long) of my talk at the Centre People Appointments HR seminar earlier this year, on why people love Japan, but don’t want to work for a Japanese company, and what Japanese companies can do about it.

If you  want to know more about working in a Japanese company, you can find our Japan Intercultural Consulting e-learning modules on Teachable, starting from £39 https://japan-intercultural-emea.teachable.com/

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If the nail sticks out too much, you can’t hammer it down

One of my least favourite and most used expressions about Japan is “the nail which sticks out gets hammered down”.  It does however have its use in explaining Japanese risk aversion when it comes to individuals going against the group. Of course many successful business people did well precisely because they were not conformists – and Japan is no exception to this.  Tadashi Saegusa, now senior chairman of Misumi and Yoshimitsu Kobayashi, chairman of Mitsubishi Chemicals are both nails which stuck out, despite their senior status in the Japanese business world.

In a conversation moderated by Nikkei Business magazine, Kobayashi talks about how he did not join Mitsubishi Chemical until the age of 28, having spent some time in post graduate study, including in Israel.  He therefore missed the usual graduate entry scheme. “I was an outsider from the start” he says. Saegusa initially joined a predecessor company of what is now Mitsui Chemical but then left to join the Boston Consulting Group – the first person to be recruited by them in Japan.

Japan has become complacent

Both worry that Japan has become complacent during the 30 years of the Heisei era.  Japan’s GDP has stayed flat, whereas the USA’s GDP has doubled during that time, says Kobayashi. 7 of the world’s top 10 companies were Japanese in 1989 (mostly Japanese banks) whereas not one of them is in the top 10 now. Kobayashi worries that Japanese people are not aware of how this seems from the outside – citing a survey that shows that 83% of young Japanese people are satisfied with the current situation.

Saegusa agrees that there is no sense of crisis in Japanese companies and of understanding what is lacking. For 27 years people have been told not to spend money or invest, which is the same as saying “don’t challenge the status quo”.  “Everyone is in the same situation in Japan, so we’re rotting from the inside, if we don’t challenge ourselves.”

It can’t just be about the art of manufacturing, it’s how you design the business too

Even in basic research, China is top, and Japan is somewhere between 4th or 10th depending on the survey, says Kobayashi. “Yes Japan still leads in some sectors globally, but starting with semi conductors, there are many areas where it has lost share. How long can Japan keep its share of the carbon fibre business when Taiwan and South Korea are chasing it? It’s just a question of time.  It can’t just be about monozukuri (craftsmanship, manufacturing ability). It’s how you design the business itself.”

Saegusa believes that such a large gap has opened up with the US in some sectors that it’s too late to catch up. “But Japan has just let this situation drag on. You can do something when a company still has life left in it, but when there is no money or resources left, then it’s too late. You have to look at the worst case scenario and focus the business, showing a path to survival, before it happens.  That is what a leader needs to do.”

Only 10-20% of people in a group will take action

“Only 10-20% of people will actually take action in any large group of people” says Kobayashi. So many Japanese companies are still sitting on their cash, despite Abenomics. “Companies and their managers have lost the will to fight and just want to avoid doing anything extreme. They’ve lost speed and dynamism.”

“If you look at the US in the 1990s, it was revived by venture capitalists, university researchers and professional managers who would trigger changes. If you took a risk as an individual and succeeded, you would earn big money.  But Japanese companies put priority on balance and are group oriented – it’s difficult to develop professionals. If you try to become a professional, you get slapped down. Everyone turned into salarymen, who would not take risks. That’s why we we’ve ended up not being able to develop managers.”

The age of the individual and platformers

Kobayashi believes this model worked in times of high growth and mass production. But now in the age of the individual, it is the platformers like Google, Amazon, Facebook and Apple who are using new cultures and innovations as triggers. “Japanese businesses do not realise what a handicap their culture is.”

Japanese companies have become too big, says Saegusa. “There is not that ‘create, build and sell’ mentality you get in the US. Bloated companies don’t give rise to leaders, rather to people who are good at pulling everything together.”

See your predecessors as war criminals

When he was working at Mitsubishi Chemicals, Kobayashi would say “see your predecessors as war criminals” (senpai wa senpan 先輩は戦犯). “If your predecessor did something wrong, you have to say so and do something about it, otherwise it won’t change. And when you become a senior manager, you have to be prepared to be treated like a war criminal.”

“A nail which sticks out too much cannot be hammered down” says Saegusa, noting that Kobayashi is rooted in a strong sense of values. “But such people are rare, even though they are needed right now.”  When Saegusa left his Mitsui group company, he was seen as an outsider but now more and more people say that his life choices were the right ones. “If organisations treasure outsiders, they will find the old order breaks apart – but they may fear this kind of revolution.”

When Kobayashi was running Mitsubishi Chemical, he appointed a CTO, CIO and CMO from outside the organisation. “I felt that we could not develop such people inside the company. Now I am an external director of Toshiba, and we appointed a CEO from outside the organisation. Japan will have to change its corporate governance radically in the next five years to deal with the fast pace of change globally.  If you make use of an external perspective early on, then you can deal more effectively with changes such as more vocal shareholders.”

Mitsui and Mitsubishi must lead the change away from big company disease

Saegusa worries that it might take 20 or 30 years more, to reach an absolute bottom, before Japanese people understand what their fundamental strengths are.  Large groups like Mitsui and Mitsubishi must take responsibility for leading the change away from “big company disease”.  “We have the information resources to know that we are losing on a global level.”

“It’s not over for Japan. I also think Japanese people can be great, but we need to reflect on what has happened and realise we have become complacent. We have been totally defeated these past 30 years, but if we can work together to find out spirit to fight back, we can be a strong country once again”, says Kobayashi.

This dialogue seems in strange contrast to the kind of articles we read in the Western press in recent years saying that while Japan is not Number One any more, there are so many good things about the country in terms of civility and a general good standard of living. And this is reflected in how Japan has become such a popular tourist destination.  I suppose we recognise there are worse models than becoming a gently stagnating, ageing society where people are polite and kind to each other.

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“Let’s be lovers first” is a high risk approach to acquiring overseas for Japanese companies

Most Japanese companies assume overseas acquisitions are high risk – and yet continue to acquire in pursuit of growth. But according to research from Daiki Tanaka (formerly of McKinsey and now running his own consultancy) Japanese overseas acquisitions of companies in the same industry from 1996 to 2018 had a lower failure rate (2.8%) than domestic Japanese acquisitions where the acquiring company is “jumping” into new sectors (3.4%).

The money at stake is are far bigger however for overseas takeovers.  The average price tag of an overseas acquisition is Y24.5bn (over $200m), whereas the average domestic acquisition in Japan is around Y1bn (over $9m). This would be partly skewed by recent mega acquisitions such as Takeda acquiring Shire for  $62bn and SoftBank acquiring ARM for $32bn.

Tanaka also concludes from his research that a “let’s be lovers first” approach is actually a higher risk strategy for overseas acquisitions. Taking a minority stake and then gradually raising it to full ownership/marriage can mean that due diligence is insufficient and the minority shareholder has not been able to participate fully in corporate governance.

Tanaka expects Japanese companies to continue to acquire overseas companies from the same industrial sector, because lower risk domestic acquisitions will not necessarily help to access higher growth overseas markets. If they want to escape the low growth, ageing Japanese market, acquiring overseas is the obvious quick route out.  It would seem that a virgin marriage is recommended however.

 

 

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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.

 

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Hitachi acquisition of ABB power grid business is a “Black Ship” to push globalization

It’s been 10 years since Hitachi made its record breaking loss and Takashi Kawamura became Chairman and President.  Kawamura was chairman when Hitachi decided to buy Horizon Nuclear Power in the UK in 2012, and he now says he was one of the more cautious faction. “Costs pile up long before you’ve even produced one kilowatt of energy so I made it clear that we needed to set various points at which we will decide whether to proceed or not with the project”.  Takashi Kawamura is now chairman of Tokyo Electric Power, so has not managed to escape the nuclear power industry despite his cautiousness.

Hiroaki Nakanishi lasted 4 years as President from 2010 to 2014, when Toshiaki Higashihara, also interviewed in the same Nikkei article, became President. Higashihara has not only frozen the Horizon project but acquired Swiss company ABB’s power grid business in 2018.   “Globalization has not been achieved yet” for Hitachi he believes. He tells employees that the ABB acquisition is a Black Ship he has invited in, just like the foreign pressure to open up Japan in the Meiji Revolution, to change Hitachi and push globalization further.

Hitachi is shifting more into services and believes it has the right product and solution mix to for the “Internet of Things”.  Sales may not grow much – for services business the point is to improve profitability, rather than sales volume, Higashihara points out.

Kawamura also says the old ways, of life time employment and being a generalist have to come to an end.  Hitachi offered retraining for people employed in the businesses he shut down or spun out, like the semi conductor business, but many of them had expected to stay at Hitachi all their life, and not to have to find work elsewhere.

Higashihara goes on to say the next leader needs to be able to manage globally, in particular, to be able to communicate, across generations, nationalities, sexuality and gender.  “If they seem to have the right balance of qualities, it would not be a surprise if it was a foreigner” who succeeds him.  That is likely to be soon, as Higashihara has been president for 5 years now, and 6 years is usually considered to be the maximum for Presidents in companies such as Hitachi.  Maybe the Black Ship has brought some potential candidates with it, or Hitachi Rail’s former CEO Alistair Dormer, now Representative Executive Officer, Executive Vice President and Executive Officer of Hitachi Ltd is being lined up for the job.

 

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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.

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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.

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.

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Nissan and Ghosn – the cycle of coups d’état reaches back to the 1960s

I always prefer coincidence or cock-up to conspiracy, and former journalist and PR consultant Masaki Kubota clearly feels the same way, judging by the first few paragraphs of his article on Carlos Ghosn and Nissan in Diamond magazine.

As he says, in his years as a journalist, it was the standard defence of any Japanese executive caught up in a scandal that it was a conspiracy of people out to get him.

With Ghosn, you could easily claim, as many have, that this was a conspiracy, born of some kind of alliance between insiders at Nissan who wanted to get rid of Ghosn, his ex-wife and the Japanese government, and this kind of accusation is handy both for Ghosn and the French government or Renault who might have wanted Ghosn to continue to be influential.

But then Kubota does a classic kishotenketsu twist, pointing out the history of Nissan, going back to Ghosn’s installation and even before, is one of a cycle of coup d’etats.

Starting with the most recent history, of the inspection scandals – the exposure of the problem was a way of resisting the inspection system that Ghosn’s management team had introduced, shortly after Saikawa (identified as one of Ghosn’s team) became the new President of Nissan. It was in effect an abortive coup d’état.

Going further back to 1999 the then President Yoshikazu Hanawa was in negotiations with Daimler Chrysler and Ford but instead installed three Renault executives, without even consulting the previous Presidents who were advisors to the company at the time. “It was a kind of a coup d’état” the Nikkei said at the time.

Purging the Don

Even further back, to the 1980s, when the Chairman and former President for 16 years from 1957 was Katsuji Kawamata, there was a coup which led to the purge of union power at Nissan in Japan. It was well known that Kawamata gained his power through cooperating with the Nissan group labour union leader Ichiro Shioji. But then in 1984, Shioji, who was seen as the main obstacle to Nissan opening its factory in Sunderland UK and before that in the US, was hit by a scandal – photos appeared in the weekly magazine Focus, of Shioji on a yacht with a beautiful young woman.  Criticism of Shioji, as “the Don”, mounted and he resigned on 22nd February 1986. The Nikkei reported on this as “the 2.22 coup d’état” a reference to the 26th February Incident, a failed coup attempt in Japan in 1936. It was said that the power behind the 2.22 coup was Takashi Ishihara who was in favour of global expansion, and was the President at the time.

Ishihara had been involved in an earlier coup, when he was still at managing director level in 1969. Documents were leaked to the media about an incident involving a Nissan microbus.  It became clear that this was done in order to purge the upper ranks of the company.

As Kubota says, when there is a fraud in a company, this is often results in a clear out of those in the upper levels of management who are to blame.  In fact, this kind of incident has been quite rare at Nissan, so when it happens, it is likely that it is part of a major change in strategic direction.  So, Kubota asserts, it is definitely a coup d’état.  In Kubota’s experience, it is hard to change a corporate culture that easily, so if Nissan is used to changing strategies by coup d’état, then it will continue to use this mechanism.

Corporate culture will not change just because foreign executives are put in place. Kubota reminds us that for Saikawa to criticize Ghosn so strongly, when Ghosn has not yet been put on trial, is certainly a change from the usual crisis management of Japanese companies.

Kubota sees this singling out of Ghosn by Saikawa, who worked so closely with Ghosn for many years, as a kind of personal insurance.

So where does Saikawa fit in? Kubota has dug out the fact that Saikawa was executive assistant to the President from 1992, Yoshifumi Tsuji. Tsuji had taken over from Yutaka Kume, who had succeeded Ishihara, the instigator of the coup against union Don Shioji.  Saikawa was therefore part of the team that survived the Renault coup.

So it goes round. As Kubota puts it, even in the midst of this coup d’état, there will be people wondering whether they will be the next to be stabbed.

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