Nissan, Ghosn and Japan’s legal double standards – The Japan Times

NEW YORK – In Japan, is there one standard of justice for Japanese executives and another for non-Japanese executives? The forced resignation on Monday of Nissan Motor Co.’s chief executive officer, Hiroto Saikawa, certainly seems to suggest as much.

When Nissan wanted to get rid of its then-chairman Carlos Ghosn, it conducted an internal investigation that was kept from Ghosn, found some examples of allegedly inflated compensation, sent the evidence to prosecutors — again without its chairman knowing — and patiently waited for a surprise arrest when Ghosn landed in Toyko last November.

Ghosn then spent the next four months in a small jail cell, under dire conditions that were designed to break him and force a confession. “Hostage justice,” Ghosn’s criminal defense lawyer Takashi Takano calls it.

Although Ghosn was released on bail in March, he remains essentially under house arrest. One of the conditions of his bail is that he is not allowed to communicate with his wife, Carole. “Ridiculous and inhumane,” fumed Takano in a conversation I had with him a few weeks ago.

In a statement issued Monday afternoon, Ghosn described Nissan’s allegations as “baseless,” and described the company’s actions against him as “their orchestrated coup.”

Now consider Saikawa’s situation.

A fierce opponent of Ghosn’s plan to merge Nissan with its smaller alliance partner, Renault SA, Saikawa took charge once Ghosn landed in prison. He was, by most accounts, a terrible CEO, unable to heal the rift with Renault, while his tenure, as Bloomberg News put it, was “marked by a series of missteps.” He skipped a press conference in which he was supposed to talk about the company’s falsification of emissions data, for instance. He also failed to stem a steep profit decline: Earnings were down 94 percent in the quarter that ended in June. Over the last year, Nissan’s stock price has dropped nearly in half.

Last week, the results of an internal investigation revealed that Saikawa had received compensation that was … well, whaddya know? … inflated. According to Bloomberg News, he was overpaid by ¥96.5 million via stock appreciation rights. Three other executives were also overpaid — including, irony of ironies, Hari Nada, the former head of Nissan’s CEO office, who was the first to raise questions about Ghosn’s compensation.

In response to all of that, did a whistleblower inside Nissan launch a secret investigation? Did anyone turn over evidence to prosecutors? Were Saikawa and the others arrested, tossed in jail, and interrogated endlessly? You know the answer to that: Of course not.

Instead, the Nissan board unanimously voted to demand Saikawa’s resignation. That’s no doubt humiliating. But it’s not even remotely on par with what happened — and is still happening — to Ghosn.

Who did blow the whistle on Saikawa? That would be Greg Kelly, Ghosn’s former deputy. Kelly and his family say Nada lured Kelly back to Japan so that he too could be thrown in jail and charged with crimes related to Ghosn’s compensation. In June, Kelly gave an incendiary interview to a Japanese magazine in which he also said that Saikawa had signed off on Ghosn’s allegedly hidden compensation.

I don’t have a problem with how Nissan handled the Saikawa scandal. A whistleblower’s allegation led to an internal investigation — one that everyone in the company knew about — which in turn led to the CEO’s ouster. Saikawa has also promised to return his excess compensation. That seems like the right solution.

The better question is why couldn’t Nissan have acted in the same manner in dealing with Ghosn? Yes, it was more complicated in that Ghosn was also Renault’s CEO and the mastermind of an automotive alliance that included Mitsubishi. Surely, though, Nissan’s Japanese executives could have found another way to oust him without scheming to have him arrested. If, after they’d pushed him out, prosecutors felt he had committed crimes, then fine. Arrest him. And if that’s the right path, then do the same with Saikawa.

Nissan said that in searching for a new CEO, the pool of candidates will include “non-Japanese, women and people from Renault.” But would any non-Japanese manager really be interested in taking the helm at Nissan given what happened to Ghosn? It’s a little hard to envision.

An American I know with years of experience with a Japanese multinational told me once that the Japanese criminal justice system makes a distinction between two kinds of corporate crime. If the wrongdoing is part of an effort to help the company, the culprit will usually get off with a slap on the wrist. But if its purpose is to enrich oneself, the system comes down hard on the wrongdoer.

Based on what we’ve seen with Nissan over these past months, I’d say there is another distinction the Japanese criminal justice system makes: Regardless of the severity or nature of a crime, if you’re a non-Japanese executive accused of wrongdoing you are likely to get tossed into prison.

Joe Nocera is a Bloomberg Opinion columnist covering business.