November 19, 2018

Agenda – ‘Dark Side’ of Power? Governance Pros Weigh In on Nissan Chair’s Arrest

By Jennifer Williams-Alvarez

Once celebrated Nissan chairman Carlos Ghosn was arrested Monday after an internal investigation revealed he underreported his compensation to authorities in Japan for years and misused company assets. Ghosn and representative director Greg Kelly, who has also been arrested, had been under investigation by the company for several months related to the allegations. The Nissan board is expected to meet this week to remove both from their posts.

At a press conference in Japan late on Monday, Nissan CEO Hiroto Saikawa spoke of the “dark side” of placing too much company power in one person’s hands and called the corporate governance structure within the company “weak,” according to Bloomberg. The lack of transparency meant that wrongdoing could not be detected, the CEO added.

Saikawa also spoke of governance changes in store for Nissan, noting that the company aims now for a structure that is not dependent on one individual and that “purely” independent directors will join the Nissan board, Bloomberg reports.

The circumstances at Nissan indeed highlight the risks associated with enabling an individual to wield too much influence at a company, says Robin Ferracone, CEO of executive compensation consultancy Farient Advisors. I feel as though, where there tends to be a breakdown in governance, there does tend to be a concentration of power,” says Ferracone, who is a director at pet insurance provider Trupanion and chair of the compensation committee.

Moreover, the situation brings up questions about the role of the rest of the board, says Eric Laptook, founder of risk consultancy firm Laptook Risk Consulting and former general counsel of TK Holdings, the North America operating unit of the Japan-based automotive parts manufacturer Takata Corporation, which filed for bankruptcy last year amid a scandal relating to air bag failures.

Having worked with Japanese companies for more than two decades, Laptook’s experience is that boards in such companies “do not effectively” deal with a strong executive or CEO. “It’s a very difficult and seemingly different dynamic than we appreciate in the United States,” he says, noting that he is not suggesting that the approach in the U.S. is necessarily better or worse than in Japan.

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