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Main image for 4 Questions about the Arrest, Firing of Nissan’s Chairman
News|Quote

4 Questions about the Arrest, Firing of Nissan’s Chairman

Law360

11.28.2018

Nissan Motor Co. and Mitsubishi Motors Corp.’s abrupt dismissal of Chairman Carlos Ghosn over alleged financial misdeeds has sparked a host of questions about the downfall of a prominent automotive industry leader and what’s next for the companies he led.

Ghosn’s sacking as chairman of the board of directors at both Nissan and Mitsubishi — days after Japanese authorities arrested him for alleged misconduct including underreporting his income and misusing Nissan funds — spells upheaval for France’s Renault and Japan’s Nissan and Mitsubishi. The global alliance comprising the three companies represents the world’s largest automaker, and the allegations against their longtime leader have brought corporate governance concerns to the forefront.

Here, Law360 examines key questions surrounding Ghosn’s ouster.

Were There Gaps in Corporate Governance?
As a lead architect of what was initially the Renault-Nissan alliance nearly two decades ago to help rescue Nissan from the brink of bankruptcy, Ghosn has served as both Nissan’s chairman and Renault’s chairman and chief executive officer ever since. Ghosn then took on the additional role of chairman of Mitsubishi after it joined the alliance in 2016.

“There was too much power concentrated in one individual,” Hubbard said. “When Ghosn was operating without issues, the consolidation at the top was viewed as a good thing. It increased collaboration and cooperation between the groups. But the arrest of Ghosn illuminates the challenges associated with power concentration. With a single arrest, the leadership of three major auto manufacturers is in turmoil. It should serve as a warning to other firms that are in similar situations.”

That level of influence by a dominant and charismatic leader, as Ghosn is said to be, along with Nissan’s slow embrace of corporate governance reforms introduced by Japanese Prime Minister Shinzo Abe in recent years, may have created holes in Nissan’s system for checks and balances, some experts say.

“In Japan, they may not be as far along in terms of changes that have been made in our corporate governance models since Enron or Sarbanes-Oxley, where there’s a lot of emphasis on separating the chairman from the CEO position so there’s actually someone looking over the shoulder of the CEO and having robust processes analyzing how the company is functioning,” said Howard Berkower, a partner with McCarter & English LLP specializing in corporate governance and securities regulations.

Based on the allegations, Ghosn apparently “ruled with a heavy hand, and the board seemed to be somewhat passive, so there really weren’t the kinds of checks and balances that you’d look for,” Berkower told Law360.

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