The fall of Carlos Ghosn is the just latest in a series of shocks involving some of the country’s biggest companies
E ven as Carlos Ghosn sits alone in a tiny cell, with just 30 minutes of daily exercise to break the monotony of detention, Japan has found it hard to muster a shred of sympathy for a man hailed as a colossus of the global car industry until his rapid downfall just five days ago.
But however badly the affair reflects on the former chairman of Nissan as a business leader, his arrest last week over allegations of “significant financial misconduct” raises equally serious questions about the health of Japan’s corporate culture.
Critics have attributed the scandal to the executive’s imperious personality and the lure of personal enrichment, after prosecutors arrested Ghosn on allegations of understating his income in financial statements by ¥5bn (£35m) over a five-year period.
But that is only part of the story, according to Sarah Parsons, managing director of Japan In Perspective, a business consultancy supporting Japanese firms in the UK. “While corporate governance scandals are not unique to Japan, there are certainly unique cultural factors that mean bad business behaviour is allowed to fester in Japan,” she says.
Parsons blames poor corporate oversight and the dominance on Japanese boards of company “insiders” – almost always middle-aged men who have formed impenetrable networks during careers spent working for the same company. Instead of exercising vigilance against potential wrongdoing, employees – even those at senior level – are expected to maintain harmony and avoid gaining a reputation as a troublemaker.
“Given the strict hierarchies in Japanese society, expecting individuals to blow the whistle on their peers – or, even worse, their seniors – is a cultural no-no,” Parsons says. “The consensus-driven and long-winded nature of Japanese decision making has in some cases led to a lack of willingness to be accountable and a tendency to avoid the consequences until forced.”
Michael Woodford understands that better than most. Seven years ago he was lauded by some as a champion of corporate transparency when, soon after becoming the first foreign chief executive of Olympus, he exposed systematic accounting fraud at the Japanese medical imaging company.
