Carlos Ghosn was once a legend of the automotive world, pulling Nissan back from the grave to become one of the world’s most iconic brands. In an economically battered 1990s Japan, Ghosn became a kind of folk hero, a symbol of hope and restoration. With his brash personality and stylish character combined with his skill for streamlining business operations, he quickly rose to celebrity status, even being drawn into Japanese comic books. In-step with his larger-than-life presence, he was the chairman for Renault, Nissan, and Mitsubishi Motors simultaneously.

That all came crashing down when it was discovered he’d been underreporting $44 million in income and misappropriating company funds from Nissan. Although it has been debated that the publicity of the scandal could be part of an internal coup d’état to separate Nissan from Renault, Ghosn has been lambasted by Nissan’s CEO (who Ghosn himself hand-picked), calling on the board to remove him as chairman.

Scandals like this aren’t uncommon – but what is surprising is how Nissan’s CEO and board of directors reacted to his crimes by immediately, and publicly, turning on him.
Contrast this with Steve Jobs’ options backdating scandal, where Apple’s General Council took the fall for Jobs, or Elon Musk promoting a fraudulent $420-per-share private sale with minimal backlash from Tesla, or the absence of charges against any executives of Kobe Steel when they lied to customers about their quality data. What makes Ghosn so different that his board would immediately oust him? Could be this be an example of ethics and good governance on behalf of the board?

Although this could be a case of good governance in action, it may be difficult for critics to imagine that an active, engaged board would not be aware of Ghosn’s illegal activities, which were taking place since at least 2010. However, the problem may lie with boards themselves. It has been suggested by researchers that boards are ineffective at their monitoring duties due to the principal-agent problem, knowledge barriers, management tactics, time demands of their other jobs, firm complexity, and a culture of deference. Echoing the ideas of our founder, Mac Van Wielingen, there is an imperative need fordirectors to become more active and more assertive with corporate governance, or we can expect to see more cases like Ghosn’s and corruption continue to thrive.

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Viewpoint Research Team

Corruption has a high price. Globally, corruption has been estimated to total to 2% of the global economic output, which is around $1.5 – 2 trillion. How is it so rampant? Bribery and unethical behaviour can be contagious- “competitors that offer better products lose out in an unfair marketplace and this triggers a race to the bottom..." This is already happening in some regions, with Amazon employees allegedly leaking data for bribes, Novartis embroiled in controversy over bribing Chinese healthcare professionals to boost sales in 2016, and the Danske Bank found to have laundered over $234 billion between 2007 to 2015.

Just having anti-corruption laws might not be enough.

Canada signed the OECD convention to stop white-collar crime more than two decades ago. However, a new report suggests that Canada is losing ground in the battle against corruption, with active enforcement of foreign bribery laws declining. “Canada is at the ‘back of the pack’ of OECD countries when it comes to clamping down on the bribing of officials abroad,” with only four foreign bribery cases being initiated and one concluded in three years.

Though law enforcement and policy makers play a big role, there are things businesses can do to take a stand against corruption. There needs to be focus from the inside out; corporate boards and top management must focus on aligning strategy, embedding a culture of compliance, and providing consistent processes on monitoring and reporting unethical behaviour. Mac Van Wielingen, founder of Viewpoint and Canadian philanthropist, has advocated that corporate boards should take a more active role. “As leaders who oversee the most important decisions in an organization, directors have an unshakeable and implicit responsibility to ensure management pursues a path of ethics and legitimacy, through embedding a culture of compliance and ethics, and “ethical performance” through culture, strategy and accountability systems.” Directors cannot afford to be bystanders; instead, they must be actively responsible for the outcomes.

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Viewpoint Research Team

Good Governance or a Coup D’état? What Ghosn’s Board Can Teach Us About Corruption

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Is Canada Losing the Battle Against Corruption?

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