Corporate Governance in Globalising World

Running head: CORPORATE GOVERNANCE IN GLOBALISING WORLD
CORPORATE GOVERNANCE IN GLOBALISING WORLD
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CORPORATE GOVERNANCE IN GLOBALISING WORLD1
Question 1:
Carlos Ghosn was the chairman of the alliance between three renowned automobile
companies in the world- Nissan Motor Co. and Renault SA and Mitsubishi Motors
Corporations. Later, these three companies sold 10.6 million of cars all around (Stahl and
Brannen 2013). He was considered to be the titan of the automobile industry and was widely
known for the performance based compensation and cost-cutting. Carlos Ghosn was once
widely considered to be a hero in Japan as he was the one to turn around the Nissan when the
company was on the brink of bankruptcy (Barmeyer and Mayrhofer 2016). As per the four
articles, Carlos Ghosn’s management of his own pay package has become the main reason
behind his downfall. He was arrested in Japan on 19th of November, 2018 over the allegations
of ‘grave’ financial misconduct. This arrest is considered to be his remarkable fall from the
grace for a man who was once regarded as one among the most powerful executives in the
automobile sector. This arrest has been a jolt to the automobile industry that was facing
challenges due to the global trade war, which was a shift of the consumers towards the
electric cars and the competition form the non-traditional makers of cars. However, Carlos
Ghosn has had maintained his reputation as being innocent since being arrested and has
argued that the case that was claimed against him is a nothing more than a conspiracy.
Although, Ghosn had pitched himself as being the fiercest defender of the Nissan autonomy,
the executives had argued that the company was underperforming at that moment and the
whole promise of the autonomy was based on performance. It was in 25th of April, 2019,
when Ghosn got released from the Tokyo Detention Center when the court rejected the
appeal to keep him in custody from the prosecutors. Ghosn came out of the count with his
head held high, claiming that he is innocent. However, later, it was declared that there was
ample of evidence that suspect the violations of the laws and regulations.

CORPORATE GOVERNANCE IN GLOBALISING WORLD2
Nissan can be considered as a traditional Japanese firm that use the corporate auditors
to “audit” the board of management and directors. The swift downfall of Ghosn comes as an
outcome of the Japanese criminal case against him for causing the company to make the
incomplete securities disclosures regarding the deferred compensation. The case illustrate
some of the most significant corporate governance issue and that is of whether Carlson Ghosn
have accumulated too much authority and whether he have exercised it in improper manner
for enhancing his power and enriching himself (Woodall 2019). However, Renault was quite
content for letting him exercising complete authority at Nissan. It also agreed to rescue the
company in the year 1999 on the condition that Carlos should go to Japan and assume his
control over the operations of Nissan. However, from the perspective of a comparative
corporate governance, this case of Nissan and Carlos Ghosn illustrates all the difficulties one
face in maintaining the practice of good corporate governance where there is controlling
stakeholder. In these cases, there is a risk that controlling stakeholder present there will have
its own benefit. However, it is very rare issue in Japan as in Japan there are very less firms
that have controlling shareholders (Joslin and Muller 2016). This is why it is also a corporate
governance issue in Japan. The swift downfall of Ghosn comes as an outcome of the Japanese
criminal case against him for causing the company to make the incomplete securities
disclosures regarding the deferred compensation. All these disclosure issues are all rooted in
the weak governance procedures of the company and at the same time, they also offer a
lesson to the investors in the other companies in Japan regarding the need for much stronger
governance protections that the ones that are brought about by the very recent reforms in
Japan. However, the core of the legal controversy is whether or not Nissan have violated the
securities laws of Japan by not including the deferred compensation arrangement of Ghosn in
its annual reports in the past 8 years. Furthermore, the other problem in the corporate
governance of Japan is the extensive cross holdings of the shares in between the firms with a