Japan Could Be More Reluctant To Hire Foreign Executives After Ghosn Incident

While appointing foreign executive in top positions is very uncommon in Japan, the Carlos Ghosn incident could stop it altogether.

Appointed in 2001, Brazil born and of Lebanese descent and a French citizen, Ghosn had led the company from the mouth of bankruptcy to riches as the CEO of Nissan. His tenure as the CEO of the Japanese car maker was seen as a rare example of a foreign CEO successfully running a large Japanese company.

But that view has apparently undergone a significant change since the arrest of Ghosn in Japan on November 19 over charges of financial misconduct. He was also stripped as the chairman of Nissan and another Japanese auto company Mitsubishi.

“It will be a lot harder for foreigners to land CEO gigs [in future],” said Jeff Kingston, director of Asian studies at Temple University Japan in Tokyo.

Foreigners are usually only appointed “as a last resort” by Japanese companies, said George Olcott, who is currently a guest professor at Tokyo’s Keio University and who has been members of boards of a number of large Japanese companies.

The prospect of being bankrupt was the driver for Nissan to appoint Ghosn. His reputation as a turnaround master by taking tough decisions for cutting costs and laying off employees and his role in turning around the fortunes of Renault was one of the reasons for his appointment. The stringent strategies that were utilised by Ghosn to cost curtailment are something that would make many Japanese executives reluctant. And Nissan had benefittd from the decision.

But Ghosn apparently was a rarity in terms of foreign bosses in Japan. For example, following his questioning of fraudulent practices at the company, Michael Woodford was removed as the CEO of electronics market Olympus ion 2011 after a short period in office. On the other hand, tech conglomerate Sony witnessed a long period of low earnings while Howard Stringer was headed the company.

According to many experts, executives from Europe or the United States find that the manner in which Japanese companies are often run is very alien.

It is mostly seen that those who rise to top position in Japanese companies has been associated with the company since graduations because Japanese are reluctant to switch companies. This results in a corporate culture that is not only distinct from the West but one that can be hard for outsiders to understand and assimilate.

“It’s like organ rejection,” said Nicholas Benes, representative director at the Board Director Training Institute of Japan. Foreign executives “often don’t get accepted by the recipient host.” Despite being an American, Benes has been worked in Japan for more than two decades.

One of the charges pressed against Ghosn is that his reporting of the compensation that he received from Nissan and other companies was inaccurate as found in the documents submitted to the Tokyo Stock Exchange and this had been going on years. High pay is a very sensitive issue in Japan because there is an understanding that foreign executives demand and are given much higher salaries compared to domestic candidates.

“There’s a sense they’re there to make hay while the sun shines and will take the money and run when things go badly,” said Keio University’s Olcott.  He added that this perception could get worse with the Ghosn incident.    

“He nurtured hero worship and took too much credit for positive developments,” said Temple University’s Kingston while talking about the embattled formed chairman of Nissan. That clashed with a “culture that values discretion and humility”

(Adapted from Money.CNN.com)

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Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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