CANBERRA - Carlos Ghosn, chairman of Nissan Motor Co., was arrested in Tokyo on Nov. 19 for underreporting his income and misusing corporate funds to pay for family vacations and properties in four cities around the world.
Some wonder if top Japanese businessmen orchestrated his downfall to prevent Nissan’s merger with Renault. The case is also shining an uncomfortable spotlight on the Japanese criminal justice system’s reputed presumption of “guilty until proven guilty,” with the primary goal of securing a conviction rather than ensuring justice.
The instinctive reaction to the news was: How could he? What was he thinking? Given his massive compensation package (¥5 billion over five years), with an estimated net worth of $100 million, why would he risk imprisonment and the destruction of a lifetime’s hard-earned reputation — often voted the world’s third or fourth most respected business leader — for another 30 pieces of gold?
One clue is the culture of celebrity CEOs in an era of globalization gone off the rails. The corporate world has progressively destroyed the harmonious balance of interests between shareholder profits, CEO compensation packages, staff salaries and consumer satisfaction. In this brave new world, CEOs inhabit a bubble, hold fast to the belief in their own genius and expect to be revered as a guru.
In a wickedly funny satire back in 2011, Stanley Bing noted seven ways in which CEOs are like babies. They are the center of the universe to the exclusion of everyone else. Both are entitled to awake others at whim and demand full attention to their needs, with no thought for weekends and holidays. Neither has to worry about money. Their food is prepared for them with great care and expense. Their pronouncements, even incoherent babblings, are held to be worthy of the highest praise and admiration. They are conveyed from place A to B in vehicles reserved exclusively for them. And both can break out into a screaming rage without warning, frightening anyone around out of their wits.
The article appealed to me because the previous year I had experienced that syndrome in Canada. Coincidentally, the article’s CEO photo was that of Donald Trump.
There hasn’t been a more exciting time to be a critic of the “greed is good” philosophy of the corporate sector led by self-centric rock star CEOs. The annual Oxfam study of the world’s wealth and income distribution, presented during the World Economic Forum in Davos in January, highlighted how 82 percent of the global wealth generated in 2017 was captured by the richest 1 percent. Just 42 people own the same wealth as the 3.7 billion who make up the bottom half of the world’s population.
Australia Post’s previous CEO earned a multimillion dollar salary — more than the CEO of the considerably bigger U.S. operation — and was paid handsome bonuses in addition. The justification was the greatly increased profits his tenure had overseen. But this was owing to laying off workers in their thousands, keeping the wages of the remaining labor force depressed and running down the frequency and reliability of services while increasing their cost. In other words, profits were privatized, rich rewards were individualized and the costs and risks were socialized as the laid-off workers became welfare beneficiaries. How this is supposed to be a net social benefit is beyond me.
Ghosn’s reputation was similar. Along with other strategies, the “brilliance” of his successful turnaround of Nissan from near bankruptcy rested also on aggressive campaigns of “downsizing,” the business euphemism for large-scale firings. Again, it is an open question as to whether the net social cost of such a strategy is not higher than the traditional Japanese business culture of an iron compact between a company and its workforce, where decades of loyalty are rewarded by a lifetime job guarantee.
The Royal Commission into misconduct in the Australian banking, superannuation and financial services industry, currently in its seventh and final round, has uncovered literally unbelievable but widespread and systematic practices of malfeasance across the three sectors. Clients, sometimes even deceased clients, were billed hefty fees for services never delivered. Advisers directed vulnerable clients into services that maximized advisers’ commissions rather than protecting clients’ income. And the well-remunerated regulators were largely asleep at the wheel. Worst of all, the government fought tooth and nail to prevent the inquiry but had its hands forced by a hostile majority in the Senate. This merely reinforces public cynicism about politicians being in the pockets of the big end of town.
The depth and extent of financial malfeasance exposed by the Royal Commission is intrinsic to the nature of rent-seeking crony capitalism. Much of the corporate environment has become an ethics-free zone. As the mode of corporate leadership came to be more widely emulated in the public sector and universities, the vices of casino capitalism corrupted sectors that previously were pillars of public service ethos. The dominant management ideology has imposed the corporate culture on public sector and university administrations, with an accompanying infestation of some ethically challenged CEOs. The primary motivation becomes not public or community service, but extracting the maximum compensation package, paid for by downsizing staff and, in universities, short-changing students.
Perhaps what advanced industrialized countries need instead is a bit more of the old public service virtues infecting the private sector that has lost touch with community expectations. To restore public trust in financial institutions and the corporate sector, the best and the brightest from the public sector could be poached and perched in positions of corporate power to instruct them on what a moral compass means in practice. It is time to bring civic virtue back into the marketplace and spread civility, along with racial and gender diversity, in the boardroom.
Maybe the boardroom should look for a different model of successful corporate leadership, people who are self-effacing rather than self-promoting, who shun and deflect adulation, who have the moral imagination to feel the anxiety of those fearing — and the anguish of those experiencing — job losses, who sublimate the needs of ego into the larger goal of making their company great again. In other words, a CEO who can make the workers connect emotionally and instinctively to the larger cause of the company that transcends their immediate self-interest, and who leads by example when financial stringency calls for companywide pay-packet sacrifices.
Ramesh Thakur is a professor emeritus at the Crawford School of Public Policy, the Australian National University.