Nissan’s Crisis

This article discusses the crisis faced by Nissan due to the financial misconduct of its former CEO Carlos Ghosn. It explores the causes of the crisis, potential consequences, and the advantages and disadvantages of ethical leadership in solving the crisis. Recommendations for overcoming the disadvantages are also provided.

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NISSAN’S CRISIS
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Nissan’s Crisis
1. The Likely Cause of the Crisis
 Carlos Ghosn(Former Nissan chief) was arrested by prosecutor in Japan despite being the most
authoritative automotive chief executives in the industry
 The company suspected him of understating his pay in the company’s financial statements
 Prosecutors estimate that he was responsible for $15 million losses in the company between
2015 and 2018(Ma and Nussbaum 2019)
 $5million of the above amount is suspected to have been utilized for personal expenses
 However, Mr. Ghosn considers his arrests as arbitrary and outrageous
 He denies any wrongdoing and was freed on bail after spending 108 days behind bars
 He contends that his arrest is an attempt by some Nissan’s stakeholders to silence him and
mislead the prosecutors.
 Therefore, Nissan’s crisis is attributable to financial misconduct by its chief executive officer,
Mr.Carlos Ghosn.
2. The potential consequences of the crisis
 X-Nissan’s chief executive officer arrest has attracted worldwide attention
 Carlos Ghosn is acknowledged as the man behind the alliance between Mitsubishi,
Renault(French carmaker), and Nissan
 His arrest has resulted in significant damage to the alliance including decline in revenues,
damaged reputation, and decline in the price of its shares
 The alliance spent two months dealing with damage to its reputation caused by the arrest
of Ghosn.
 The scandal resulted in the decline in sales in China and the United States.
 Competitors in the industry including Toyota Motor Corp and Volkswagen are taking
advantage of the negative publicity to increase their sales and widen their market share
 Nissan’s is the most affected because Ghosn allegations are attributable to his tenure in
the company

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 Nissan’s profits are expected to decline by 10% (that is from 517.1 billion yen to $ 4.7
yen)( Ma and Nussbaum 2019)
 Renaults profit are expected to decline too by 8.8%(approximately $ 3.93billion)( Ma
and Nussbaum 2019)
3. The Advantages of the Selected Leadership Style in Solving Nissan’s Crisis
 Ethical leadership style was applied in solving the crisis because Ghosn had breached the
trust that the alliance had in him
 Ethical leaders are concerned with the long-term benefits, drawbacks, and outcomes of
their decisions(Mihelic, Lipicnik, and Tekavcic 2010)
 They take responsibility, are humble, pursue fairness, and influence ethical behaviors and
values in the organization
 They also demonstrate integrity, are trustworthy, honest, and courageous
 Leaders with these attributes do the following for their organizations
 Promote integrity
 Design positive standards that promotes an honest and positive
work environment
 Reduces incidences of legal lawsuits
 Promotes ethical decisions in the workplace.
4. The Disadvantages of Ethical Leadership Style in Solving the Crisis
 Ethical leadership requires comprehensive support by both staffs and management to
make it effective
 It is expensive to implement because it requires the designing, executing, and retaining of
a compliance program that reflects the vision and mission of the organization
 Compliance programs are expensive to design and maintain
 Besides, they require regular updates and review
 Leaders must be charismatic and inspirational to influence followers into adopting ethical
behaviors and values

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 However, followers might trust their leaders to the extent that they become blind to their
mistakes.
 Clarity is mandatory to avoid role confusion
5. Three Recommendations On How Those Disadvantages Could Be Overcome
 Facilitating communication effectiveness is mandatory
 It helps in increasing employees awareness regarding the importance of ethical values in
enhancing the competiveness and success of the organization
 Leaders should integrate ethics in the long-term vision of the organization so that staffs
can embrace it (Mihelic, Lipicnik, and Tekavcic 2010).
 Staffs should be responsible for reviewing and updating the ethical compliance program
in the organization.
 Their involvement makes them feel valued by the organization

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Reference List
Ma, J. and Nussbaum, A.(2019) The Ghosn Effect? Nissan, Renault Unveil First Results Post-Crisis.
Bloomberg[Online]. 11 February. Available from: https://www.bloomberg.com/news/articles/2019-02-
11/ghosn-effect-nissan-renault-unveil-first-results-post-crisis [Accessed 2 June 2019]
Mihelic, KK., Lipicnik, B. and Tekavcic, M. (2010) Ethical Leasdership. International Journal of
Management & Information System. 4(5), pp. 31-41.