A Guide to Understanding Carlos Ghosn’s “Not Guilty” Plea

by Sachiko Ichikawa
Comment by Nicholas Benes

Carlos Ghosn held a press conference on January 8, 2020 to present his “not guilty arguments” regarding the alleged crime of making, or not preventing, misrepresentations in Nissan’s Security Reports. He had already disclosed the testimony he made at the Japanese court which was considering his bail in 2019. So this was the second time that he has defended himself in public.

Mr. Ghosn spent more than one hour for his presentation, and even showed many slides and materials, but his logic for insisting on his innocence was not easy to understand. To me, his 2019 testimony in court was better than his 2020 televised presentation.  In an attempt to connect the dots, this article will explain my own interpretation of what Mr. Ghosn really wanted to say.

ICGN Urges Japan to Focus More on Independent Committees and Director Training, Other Key Areas

We are pleased to note that against the backdrop of the recent events at Nissan, the Institutional Corporate Governance Network (ICGN)  has submitted a letter to Japan’s Council of Experts for the Follow-up of Japan’s Stewardship Code and Corporate Governance Code, stressing the importance of independent directors, independent board committees, director training, use of a “skills matrix”, capital allocation, disclosures, and a number of other issues that BDTI has been stressing for many years,  – ever since its establishment in 2009, in fact.   On the topic of director training, Kerrie Waring of the ICGN wrote:

” ICGN encourages the introduction of high quality training for independent directors in Japan to help build an understanding of what their role entails, particularly in relation to monitoring management and public disclosures. This would help ensure objective decision-making in response to business issues and in alignment with the company’s vision, mission and strategy. We also stress the importance of financial literacy to ensure that independent directors are able to challenge management on issues such as capital efficiency, the use of cross shareholdings and CEO remuneration.”  (emphasis added) 

Letter from a Person Who is Concerned about the Nissan Affair:  a View from the Inside of Another Company

As you might imagine I have been besieged by inquiries from the press when I have little knowledge of what is going on, or went on, a Nissan.  I also received this spontaneous email from a friend who is concerned about the Nissan-Ghosn affair.  Having “sanitized” it, with permission I am posting it.  This particular person worked in matters related to legal compliance for 10 years at a major Japanese company.

Dear Mr Benes:

I retired nine months ago ago and after a long vacation, recently I have finally got around to looking for an outside director or other similar position.

Anyway, I wanted to write because I was floored by the whole Ghosn spectacle.  I am not close to that company, but was astounded that they chose to turn over and have arrested two foreign senior staff (Chairman and his aide) for redirecting assets to his own account “over several years.”  I was floored because:

a) Neither of them is likely that spiffy at Japanese and would need other staff to prepare the transactions for them.  Indeed even had they been Japanese staff themselves this would have required a certain amount of nemawashi at least the way the companies I am familiar with are now run.  Gone are the days when 10,000 here and 100,000 there can be disbursed at some executive’s personal discretion…..

”A Look at the Recent State of Corporate Governance in Japan”

Below is an interview on the recent state of Corporate governance in Japan that was held early this month. The interview is between Mr. Miyajima Hideaki (Faculty Fellow, RIETI / Waseda University),  interviewer and Mr. Colin Mayer (Said Business School, Oxford University), interviewee.

Mr. Mayer shares his opinions on the unique features of corporate governance in Japan, how to encourage companies to take risks, ownership structures, the role of outside directors, the comply and explain principle and the role of corporate governance in promoting strong economic performance.

”Investors Vocal at Scandal-Hit Firms”

”Wednesday marked a peak time for this year’s general shareholders meetings among major listed firms in the nation, with severe criticisms voiced one after another toward the management of companies involved in scandals, including Mitsubishi Motors Corp. Many shareholders also raised concerns about future business performances in response to Britain’s decision to leave the European […]

”Corporate governance report card”

”Japanese companies appear to be steadily implementing the corporate governance code introduced by the Tokyo Stock Exchange a year ago, at least in form. Of the 2,018 firms listed on the first and second sections of the TSE, 78 percent say they are now in compliance with at least 90 percent of the principles set […]

GPIF Sues Toshiba: Japan’s Securities Law that Makes it Easy to Sue

The the news of the day is that GPIF is suing Toshiba for $10 million. It is only one asset manager that is suing, almost certainly under Article 21-2 Japan securities law (FIL) which makes it very easy for plaintiffs to sue and claim a “presumed damages amount”, and then shifts the burden of proof to the defendant company (unlike US law) to disprove its negligence.  The stock has come down by about 26% or so.   (Interestingly, Japanese securities law in this area is much harsher than US law, which never shifts the burden of proof in such cases.)

”Arora’s departure shakes SoftBank’s global strategy”

 

”Arora also assembled a reliable, well-connected team of assistants and advisers within SoftBank. A weekly conference call connecting members of “Team Nikesh” in Tokyo, London, India and on the U.S. West Coast to their leader to discuss possible investments has become established practice — an arena for information to be brought in from around the world, and the merits of promising ventures debated.

One of SoftBank’s early — and often talked about — investments is Chinese e-commerce giant Alibaba Group Holding. Son funded Alibaba with 2 billion yen ($19 million at current rates) out of a fondness for founder Jack Ma, who was unknown at the time. That stake has yielded some 10 trillion yen in latent gains 14 years later. Though Son is famed for his sharp foresight, what lurks behind his investment decisions is “something akin to a hobby,” he has said. “It’s produced success on occasion, but quite a few failures as well.”