When Nissan Motor Co.’s then-Chairman Carlos Ghosn was arrested soon after his private jet landed at Tokyo’s Haneda airport on Nov. 19, media attention focused on his alleged underreporting of massive amounts of compensation from the carmaker. In the weeks following, however, it has become clear that the arrest represents many more complexities than one executive’s alleged misconduct.

Ghosn’s arrest was triggered by the accusation, developed by Nissan management working with prosecutors under a new plea bargaining system introduced in June, that he was underreporting income, deferring income to avoid taxes, using Nissan shell companies to pay for luxury homes in Beirut, Rio de Janeiro, Paris and Amsterdam for his own personal use, and improperly using company funds to reward his relatives. On Dec. 10, Ghosn was indicted on charges of understating his compensation in corporate filings by $44 million over a five-year period ended March 2015. Prosecutors also suspect that Ghosn may have understated his compensation in the three years ended last March, with the total suspected understatement for the eight years coming to more than $80 million.

Nissan explained that Ghosn had accumulated so much power during his 20-year reign at the company that no one could stop these abuses. Since arriving in Japan in 1999 to rescue Nissan from bankruptcy with Renault’s $5.4 billion bailout package, Ghosn was extolled not only as Nissan’s savior but also as the premier example of a global turnaround artist and management guru. He was even touted as a national hero in a children’s manga series and awarded an honor by Emperor Akihito in 2004 for his contributions. Ghosn is reportedly denying that he has acted illegally, and his claim is supported by Greg Kelly, one of his top aides at Nissan. So the first question is, what precisely did Ghosn do with his compensation and was it illegal under Japanese law?

Second, if Ghosn, as Nissan claims, was demanding excessive compensation, hiding it from the authorities and using corporate resources for his own personal gain, why didn’t Nissan uncover this sooner and do something about it? According to press accounts, Nissan did not have a compensation committee, and its board of directors was approving Ghosn’s compensation year after year for nearly 20 years. The company apparently does have an audit committee, but what was it, as well as the external auditor, doing to monitor Ghosn’s reporting of compensation and his alleged use of corporate resources for his own personal gain?

If a company discovers that its CEO is underreporting compensation or misappropriating corporate funds, one might expect that the board of directors would confront the CEO and either dismiss him or require that he change his behavior. Nissan’s decision to work closely with government prosecutors to build a case against Ghosn and to engineer his arrest (and that of his close aide, Kelly) has led some to suspect that the compensation issue was merely a vehicle for Nissan to achieve broader corporate goals. What was the nature of Nissan’s corporate governance and why did it work with the authorities to have Ghosn arrested rather than resolve the issue as an internal corporate matter, as Japanese firms usually do?

This leads to the third issue: the nature of the global alliance between Renault, Nissan and Mitsubishi Motors. Renault and Ghosn’s rescue of Nissan from bankruptcy in 1999 led to Renault gaining a controlling 43.4 percent share of Nissan, whereas Nissan has only a 15 percent nonvoting share in Renault. But Nissan’s recovery has led to its sales and profits exceeding those of Renault, with Nissan contributing over $3 billion to Renault’s pretax profit in 2017. From Nissan’s perspective, Renault was increasingly seen as a burden — perhaps even a parasite — yet its controlling shares allowed the tail to wag the dog.

In addition, Ghosn was seen by Nissan to be increasingly siding with Renault and preparing to replace the Nissan CEO, Hiroto Saikawa, with someone more friendly to Renault. Rumors within Nissan were that if this were to happen, Renault, with Ghosn’s help, would merge with Nissan. Such an acquisition by a foreign company was precisely what Nissan, as well as the Japanese government, was able to avoid back in 1999 with Renault’s bailout of Nissan.

From Nissan’s perspective, the past 20 years of strenuous efforts to become globally competitive would be nullified if the company were to fall under foreign control. So, was Ghosn’s arrest orchestrated by Nissan (and the Japanese government) primarily to prevent the merger?

The fourth issue is the role of governments — Japan in the case of Nissan and Mitsubishi Motors and France in the case of Renault — in the relationship among these three companies. The Japanese government does not formally own shares of Nissan or Mitsubishi Motors, but it is monitoring the situation closely since it considers the automobile industry to be among Japan’s most important industries, and a key to the nation’s future industrial competitiveness and national prosperity. Not surprisingly, a former senior official in the Ministry of Economy, Trade and Industry sits on Nissan’s board of directors and on the committee recently formed to review Nissan’s corporate governance.

Similarly, for the French government, Renault plays a key role in the national economy, employing 48,000 workers in France. And the government has a 15 percent ownership stake in the company. The recent demonstrations and unrest in France give added urgency for President Emmanuel Macron to ensure Renault’s continued stability, viability and profitability. Given this reality, it is hard to imagine a resolution of the current situation that is not satisfactory to these two governments. So, what role will the Japanese and French governments play in the resolution of these issues?

Fifth, the legal procedures under which Ghosn was arrested and put in a detention center with limited access to attorneys, associates and family are raising questions abroad about Japan’s criminal justice system. This system, characterized by a close relationship between prosecutors and the judiciary, boasts a 99.9 percent conviction rate. It allows for prosecutors to detain a suspect for up to 23 days before charging him, letting him go, or detaining him for another 23 days on a different allegation. A Wall Street Journal editorial on Nov. 27 charged that “Ghosn is enduring a bizarre inquisition” and that without more transparency in investigations, “the Nissan ambush will stand as a black mark on Japanese business.” On Thursday, the Tokyo District Court decided not to authorize an extension of Ghosn’s detention, raising the prospect of his release on bail, although prosecutors promptly appealed the decision. So, does the Japanese criminal justice system afford defendants the rights and protections usually provided in a democratic capitalist society?

Sixth, aside from the question of whether Ghosn underreported his compensation, Japan is at one extreme among the Group of Seven countries in the level of compensation accorded to CEOs of large companies. A decade ago, when I served on the board of directors of one of Japan’s largest financial institutions, I was surprised that the CEO’s annual compensation was under $1 million, easily one-thirtieth the compensation of his counterparts at comparable U.S. financial institutions. Ghosn was repeatedly criticized in Japan for receiving compensation far above that of Japanese CEOs. But his $17 million compensation in 2017 was below the $22 million accorded General Motors CEO Mary Barra and reportedly half that of Ford Motor’s then-CEO, Alan Mulally.

In addition to the Japanese view that huge disparities of income and wealth are undesirable, Ghosn was a special target of criticism because his method of reviving Nissan lived up to his reputation as “The Cost Killer.” That is, he revived Nissan in part by slashing its workforce, trimming suppliers and cutting inefficiencies. Clearly there was resentment among Nissan employees, ex-employees and suppliers who felt that Ghosn’s huge compensation came at the expense of those who lost their jobs. So, if Japanese society has such an aversion to high levels of executive compensation, will Japanese firms be able to attract senior foreign executives?

Finally, the case of Ghosn and Nissan raises the question in the global community whether it is possible for a non-Japanese to be successful running a Japanese firm. Over the past 30 years, there have been more than a dozen high-profile cases of non-Japanese hired to lead Japanese firms, but most were considered failures and only one stood out as a resounding success: Ghosn at Nissan.

One should be careful to distinguish Ghosn’s achievements turning around Nissan from whatever misconduct he may have engaged in more recently. One could argue that if Ghosn had left Nissan soon after reviving the firm — perhaps in 2005 — his legacy as a national hero could have remained intact. But 20 years is a long time to lead a company, and much can happen during two decades. So, will the world view Ghosn as proof of how difficult, or even impossible, it is for a foreign executive to be successful in the long run leading a Japanese firm?

It is difficult to predict the ultimate outcome of the Nissan saga, but what is clear is that the arrest of Ghosn last month evinces layers of complexities and raises numerous questions and issues about corporate Japan in the global context that will surely be debated for years to come.

Glen S. Fukushima is a senior fellow at the Center for American Progress in Washington. He served as deputy assistant U.S. trade representative for Japan and China and as president of the American Chamber of Commerce in Japan.

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