Nissan Motors: Corporate Governance Failure
(8 pages of text)
Case (Pub Mat)
In 2018, the chairperson of Nissan Motor Co., Ltd. (Nissan), Carlos Ghosn, was arrested for alleged misconduct and criminal offences related to underreporting remuneration and misrepresenting annual disclosures. Detailed investigations revealed similar misrepresentations by the company’s chief executive officer (CEO) Hiroto Saikawa, who was forced to resign. The actions of senior officials left a deep stain on Nissan’s reputation, causing investors to question the effect of corporate governance at Nissan—and by extension, at similar companies across Japan and the world. As details of the scandal unfolded, Nissan suffered negative public repercussions. Its share-based incentive systems, excessive focus on profitability, and cost-cutting measures had caused deviations from normal risk management procedures, resulting in the production of poor-quality vehicles and thus vehicle recalls. Consumer trust in the company dropped, as did sales and profitability figures, with a continuous fall in the company’s stock. The company’s new CEO and board of directors were left to make amends for the company’s future. They needed to determine how to strengthen the company’s leadership and governance structure as they worked to make Nissan sustainable and profitable once again. Should they adopt a typical Japanese model of corporate governance, or would a model from elsewhere be more suitable?
This case is suitable for graduate- and executive-level courses on corporate governance, corporate ethics, strategic leadership, financial reporting standards and disclosures, and risk management. It presents a comprehensive overview of corporate governance at a leading Japanese automaker. After working through the case and assignment questions, students will be able to do the following:
- Explain the challenges a corporate leader faces when moving to a different cultural environment.
- Analyze the leadership styles of different CEOs.
- Outline the challenges of corporate governance and the effectiveness of current corporate governance regulations in Japan, and explain how they can be made more effective.
Examine how dummy or shell companies and special-purpose vehicles can be used to commit corporate fraud.
- Examine the role of a board of directors in monitoring and supervising the actions of a corporation.
- Explain issues related to setting a director’s salary, including matters of transparency and disclosure.
- Examine the effectiveness of board sub-committees and the role of statutory auditors.
Japan, Large, 2019
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