The Rise and Fall of Carlos Ghosn

[0] From the New York Times, I'm Michael Barbaro.

[1] This is the Daily.

[2] Today.

[3] He was the rare foreign executive to reach rock star status in Japan by breaking the rules of its culture.

[4] Then he went too far.

[5] The rise and fall of Carlos Gown.

[6] It's Tuesday, April 16th.

[7] So on April 9th, this mysterious video appeared.

[8] Carlos Gown, the longtime chief executive and chairman of Nissan, which is a Japanese auto company, is sitting in this room, it's almost like a hostage video.

[9] He's sitting at this table in a very bare conference room.

[10] He's got a black suit jacket on and a white button down, but no tie.

[11] And he's looking basically straight on into the camera.

[12] And the first thing he says is...

[13] If you are listening to me through this video today, it means that I was not able to make the press conference.

[14] that I planned for April the 11th.

[15] He can't be there because he's in jail.

[16] He had called a press conference on Twitter.

[17] He was planning to explain previous charges, so he'd been arrested before, and he wanted to go out in public and explain why he was innocent of those charges, but before he could do that, he was arrested again.

[18] Motoko Rich is the Tokyo Bureau Chief for the Times.

[19] So what exactly is going to?

[20] on here?

[21] Why is the head of Nissan being repeatedly arrested?

[22] Well, this is kind of a big epic drama.

[23] All the accusation that came around these charges about culture clash on a grand scale.

[24] That are all biased.

[25] This is a story about money and greed.

[26] Twisted in a way to paint a personage of greed.

[27] And the crown jewel of Japan's economy, the auto industry.

[28] And the personage of dictatorship.

[29] This is a story about a criminal justice system that despite being part of a major democracy seems to have violations of civil rights.

[30] I'm innocent of all the charges that have been brought against me. And above all, it's about the particularities of this one unique business executive, Carlos Gohn.

[31] So tell us who is Carlos Gohn?

[32] So Carlos Gohn is this international figure.

[33] He was born in Brazil to Lebanese immigrants, and he moved to Beirut as a toddler.

[34] And then he went to some elite schools in Paris, studied engineering at elite university.

[35] And then he was hired by Michelin, the tire company.

[36] And he was working his way up there.

[37] He worked there for 18 years.

[38] He started on the factory floor, but he very quickly, his talent was spotted, and he rose through the ranks.

[39] And then they gave him the job of being CEO of Michelin's North American division.

[40] At Michelin, he realized it was a family company and he really wanted to keep going up and he thought, I'm never going to get that far in this company.

[41] I'm not going to get to the top in any case.

[42] So he took a job at Renault, which is a French company.

[43] And Reno, at that point, was reeling from a disastrous merger with Volvo.

[44] And so he kind of came in.

[45] And what his approach was, was he slashed costs.

[46] And he kind of earned this name Le Cost Cuter.

[47] And Renault itself bought a very large stake in Nissan, the Japanese company that was on the verge of going into bankruptcy.

[48] They had car models that nobody really wanted to buy, and they were lagging behind Toyota and Honda.

[49] And since Carlos Gohn had been so successful at helping to turn around Renault, they thought he might want to try his hand at doing the same at Nissan.

[50] So they sent him to Japan as chief operating officer in 1999.

[51] So basically this is a major turnaround operation.

[52] Right.

[53] And in fact, Bob Lutz, who was then vice chairman of General Motors, famously said that Renault would be better off taking $5 billion, putting it on a barge and sinking it in the middle of the ocean.

[54] That's how bad things were.

[55] This is the company that Ghosn is sent in to rescue.

[56] And how big a deal is it for a Japanese car car car car, company to turn to a non -Japanese leader?

[57] It's a huge deal.

[58] I mean, it's pretty unusual for a Japanese company of any stripe to hire a foreigner to run the company.

[59] And in particular, Nissan was an auto company.

[60] And the auto industry is the crown jewel of the Japanese economy.

[61] Back in the 80s, when everybody was worried that Japan was going to take over the world, it was the auto industry that was concerning people the most.

[62] And so the fact that this company was on the brink of bankruptcy and that the only way out they could see was to sell a large stake to a foreign company and then to have a foreign executive come in and basically take over leadership is a sign of desperation but also highly unusual.

[63] So given that, what do the Japanese make of this new head of Nissan, Carlos Gahn?

[64] So I think there probably were a handful of people, certainly at Nissan and probably within government circles and elite business circles who kind of cast a wary eye at him and thought, who is this guy, who is this foreigner, we're not sure we want him here.

[65] But he also brought in a breath of fresh air.

[66] He was different.

[67] He wore pinstripe suits and walked around with these rectangular sunglasses.

[68] And I think people started to glom on to the fact that, you know, he was a completely different leader than the word.

[69] used to.

[70] And how did he actually do at the job?

[71] So he came in and he did some really difficult things.

[72] I mean, he had his reputation of being Le Coast Couture and he did it again at Nissan.

[73] So he looked at the structure of the company, which was very similar to a lot of Japanese companies where they'd been offering a lifetime employment and he said, you know, this is a bloated workforce.

[74] And he slashed it by 14%.

[75] Like 21 ,000 people lost their jobs under Carlos Gown.

[76] But he also improved.

[77] But he also improved proved the product lines.

[78] The Nissan Maxim approves that beauty can be more than skin deep.

[79] And under his leadership, he took Nissan and made it into the second largest car company behind Toyota.

[80] So he leapfrogged over Honda and made it number two in Japan.

[81] But please don't let all these attractive qualities go to your head or to your lead foot.

[82] He also got them to 100 million of sales in the United States.

[83] He, I think it was quadruple, the stock market balance.

[84] value of the company within a couple of years.

[85] So he really delivered on his promise.

[86] I want over 300 ,000 people buy the same car.

[87] It's more than a coincidence.

[88] It's a success.

[89] So it kind of appears like he's performed a miracle in saving this auto company that no one thought that anyone could save.

[90] Exactly.

[91] He was promoted to CEO by 2001.

[92] And then his reputation started to kind of take off.

[93] Superstar CEO, also a larger -than -life figure, and almost an icon for many Japanese.

[94] He's kind of like the Steve Jobs, Elon Musk, Elon Musk, all rolled into one for Japan, a place that they're not really all that used to having superstar corporate executives.

[95] He appeared everywhere.

[96] He was on TV a lot.

[97] When he was at auto industry shows, he would stand and sign autographs, people really liked him.

[98] And there was even a manga comic book that was made about his life.

[99] Really?

[100] Yeah, yeah.

[101] There was a whole illustrated comic book about his life, which all these Japanese businessmen are reading on the trains.

[102] He writes a memoir about this turnaround, and that's a bestseller.

[103] The emperor gives him a medal, which, and he becomes the first foreign news.

[104] business executive to win it.

[105] So he's definitely a big superstar.

[106] And then Nissan has bought properties for him to use in Rio de Janeiro, in Brazil, in Paris, France, in Beirut, Lebanon, in Amsterdam, in Holland.

[107] So now all of a sudden he has all these properties, including a very nice apartment in Tokyo, and he's living this very lavish lifestyle.

[108] And he even takes a second wife, and they get married at Versailles in France, and a kind of Marie Antoinette -themed wedding.

[109] And we start to see a little bit of signs of maybe how he's crossing a line in Japan where there's a high value put on humility, a modesty, being a little bit quiet, not necessarily bragging about yourself.

[110] And I think from his perspective, he just felt, I'm just doing what a corporate CEO of a global company should be doing.

[111] He had rescued the company.

[112] That's incontrovertible.

[113] And he had proven that his methods, though painful, worked for shareholders and for the company.

[114] Management is not about doing easy things.

[115] Management is about doing things that usually people don't want to do.

[116] And I guess even if he's rubbing people the wrong way culturally, shareholders are happy with him.

[117] The media treats him like a darling.

[118] and it's working out perfectly well for him, given these houses that are being rented for him, this lavish wedding, this is working well.

[119] You would think so, but it turns out that he was still quite unhappy.

[120] I think he felt that compared to his peers in the international auto industry, he was not paid well.

[121] And so even though he was making, say, $16 .9 million, that was much less than the $21 million in change of, say, Mary Barra, a general motion, And so I think that he felt that he was not compensated appropriately for the level at which he was playing.

[122] People look at this, but say, yeah, but in Japan, you're the highest seller in Japan.

[123] Yes.

[124] So at the same time, Nissan, it cannot be considered only as a Japanese company.

[125] It is a company based in Japan but on a global trend.

[126] So why is he making less money than his American counterparts?

[127] What explains that?

[128] So I think there are a couple of things going on here.

[129] first of all, in Japan in general, there's this more this egalitarian sense that it's somehow unseemly for the top executive in a company to make too many multiples of what the average salary person makes in the company.

[130] In the case of Nissan, they actually tried to sort of institute that in their own codes, and they put a cap on the amount of pay that all executives could make.

[131] So this was in 2008, Japanese law actually.

[132] began to require that companies disclose directors pay in their annual report.

[133] And so that year, Nissan shareholders voted to set an annual cap of about $27 million on compensation.

[134] And that was for all board directors combined.

[135] So that was part of what was driving it was that they knew that they would have to tell the public what they were paying everybody.

[136] So if Carlos Gown wanted to make sure that he got top pay, that meant there would be very little left for all the other directors on the board.

[137] So the bigger his salary, the smaller the salary of those around him, his deputies who work with him.

[138] Exactly.

[139] And meanwhile, Nissan itself is not doing so well.

[140] And it started to become clear that they were not meeting their targets.

[141] And dealers were starting to complain.

[142] They were saying they were being forced to sell cars at deep discounts.

[143] So there was a lot of general dissatisfaction.

[144] So there started to be some whispers, you know, as the goan magic disappearing.

[145] And then in November 2018, Carlos Ghosne lands in a corporate jet at Henneda Airport in Tokyo, and there are cameras waiting at the airport and prosecutors.

[146] And these prosecutors board the plane, and they start to question him.

[147] And then they take him in and they arrest him.

[148] Breaking news, in the past few minutes, Nissan has revealed that its chairman has been arrested.

[149] Carlos Gond has been arrested at Tokyo, in Japan.

[150] And it's this sort of crazy scenario that the CEO who was revered as a rock star in the audio industry that was well known on the Davos Circuit was suddenly arrested in Tokyo and taken to jail.

[151] It was a total shock.

[152] The question is now, of course, will the board oust him, which of course we largely expect, not just from Nissan, but from the other car companies that Carlos Gone heads up?

[153] And what has he been arrested for?

[154] What are the accusations?

[155] It was an internal investigation that was launched and took place in the last few months that led us to this moment.

[156] So the allegations have to do with pay.

[157] It turns out, according to the prosecutors, that Carlos Gown, in cooperation with a top aide named Greg Kelly, that they had basically figured out a way to pay Carlos Gown more than they were.

[158] were declaring on their annual reports.

[159] Nissan says it's been going on for years.

[160] So the allegation is that he hid about half his pay.

[161] And the way apparently he did that is that they effectively created sort of two pots of pay.

[162] So there was the legal above board within limit pay that he was given every year.

[163] And then there were sort of these IOUs of the amount of pay that he would get after he left Nissan.

[164] And so the allegation is that he figured out a way to pay himself.

[165] basically double what they were reporting to the securities agencies.

[166] And so the indictment is that they failed to report his full pay.

[167] Hmm.

[168] And how big a deal is this charge?

[169] So this charge, I think, there's been a lot of debate.

[170] When he was first arrested, I think a lot of people said, why are they arresting him for this?

[171] I mean, come on.

[172] First of all, it's the company's responsibility.

[173] Do you actually think that Carlos Gown sits in an office?

[174] and fills out the securities filings, no. And then the other bigger point I think people were making was if there's a debate about whether he's being paid too much or he's breaking the internal shareholder rule about the cap, isn't that something that should be dealt with by the board of directors, not something that should be brought to prosecutors?

[175] Does the guy need to be thrown in jail for this issue?

[176] So there's a lot of debate about that.

[177] I think a lot of it is cultural.

[178] So when you talk to people in the expat community, you hear a lot of that sort of questioning, of whether this was an appropriate use of prosecutorial power.

[179] Whereas if you talk to Japanese business people, a lot of them say, look, the law is that you have to report your pay, and they didn't report his pay, and he was the chief executive and chairman of the company, and so he should have known that they were misreporting his pay.

[180] So there are all these reactions out there, and then Gohn himself, as we've seen in this video.

[181] I've been always consistent with this position that I was innocent of all the charges.

[182] First and foremost, he says he's innocent.

[183] And he kind of leaves that out there.

[184] The second message I want to send you is the fact that...

[185] And then he goes on to talk about how he wants to emphasize that he loves Japan.

[186] I love Japan and I love Nissan.

[187] Nobody spends 20 years in a country without love and without attachment.

[188] But then he talks about how he has been the victim of a campaign of backstabbing.

[189] This is a conspiracy.

[190] And he won't name names, but he's talking about these people who he's, says, are now in charge of Nissan, and he's really worried about Nissan.

[191] I'm talking here about a few executives who, obviously, for their own interest and for their own selfish fears, are creating a lot of value destruction.

[192] Because these executives who won't name, who he says have been backstabbing and betraying him, have done that because they are so threatened by the fact that Nissan is getting closer to Renault.

[193] There was first a fear that the next step of the alliance in terms of convergence and in terms moving toward the merger would in a certain way threaten some people or eventually threaten the autonomy of Nissan.

[194] So this big household name in Japan is worried about kind of being swallowed up by a French company.

[195] Which, by the way, has never been threatened for the last 19 years.

[196] And Carlos Gohn is telling us that the executives at the Japanese company have been so worried about that.

[197] this, that they're trying to kick him out.

[198] That was where the fear came, because the performance of Nissan is not good.

[199] It has degradated a lot.

[200] But he's being a little bit vague, and it's kind of cloak and dagger, and we're not quite sure what's happening.

[201] I am privileged to have three competent lawyers around me who's going to defend the case.

[202] And then he goes on to say...

[203] But they don't share with me a lot of serenity about the fairness of the trial.

[204] All I hope is that I will get a fair.

[205] trial, that I can be hopefully vindicated.

[206] And why would he not get a fair trial?

[207] Well, the Japanese criminal justice system, we've learned a lot through this case, is not what you would necessarily expect from a modern democracy.

[208] So prosecutors are allowed to keep any defendant for up to 48 hours without indicting them at all.

[209] And while they're questioning them, the defendant is not allowed to have his own lawyer present.

[210] Now, in the U .S., of course, if you don't charge someone within 48 hours, they're out.

[211] But in this case, after the 48 hours, the prosecutors have the right to go to the court and say, you know, we're not quite done questioning.

[212] Can we keep them for another 10 days?

[213] Wow.

[214] And after the 10 days, the prosecutors reapplied to the court and say, you know what, we actually need 10 more days.

[215] And they gave it to him.

[216] So he was held originally for 22 days without being charged at all, without being allowed.

[217] to have his lawyer present while he's being questioned.

[218] So when you look at all of that, criminal justice experts in the United States are saying, this is not how you would expect a democratic country with basic civil rights to run their criminal justice system.

[219] Motoko, is any of this typical for how Japan would treat an executive in similar circumstances, facing similar allegations?

[220] So that's a really good question.

[221] I mean, it's certainly when you talk to expats, they sort of say, aha, this is definitely.

[222] a case of mistreating the foreigner.

[223] And I did talk to someone who said, look, you know, in Japan, we will tolerate fraud conducted on behalf of the companies.

[224] But what Japan will not tolerate is personal greed.

[225] And so that is sort of the sense in which Carlos Gohn has been cast, that what he is accused of having done was all for himself personally.

[226] So crime may be okay if it's done on behalf of a corporation and its employees, but crime done on behalf of oneself, pure greed, that crosses the line.

[227] That may help explain why Carlos Cohen was being treated this way.

[228] I think in part.

[229] That's certainly what a lot of people have told me. But then, after he'd been out on bail for a month, he's re -arrested.

[230] Early Thursday morning, Japanese prosecutors paid a visit to Carlos Ghosne's apartment.

[231] Blocking the entrance from prying eyes, they arrested the former Autotitan.

[232] And that's kind of why we were seeing that video, right?

[233] That he couldn't appear at the press conference that he was promising to give.

[234] He's now back in jail.

[235] And these charges seem a little more serious.

[236] This time, Gones been arrested after suspicions by Nissan that some pavements to its Oman dealership were for personal use by its former chairman.

[237] to the tune of nearly four million euros, according to Japanese media.

[238] And that, if there's any evidence, sounds more like a charge of embezzlement.

[239] Hmm.

[240] So, if true, these are far more serious allegations than setting up a long -term deferred compensation fund, as he was originally accused.

[241] Exactly.

[242] And I talked to this lawyer, an American, who's been in Japan for a very long time, and he was one of the people who was defending Carlos Gohn at the beginning and saying, come on, these are trumped -up charges, you should just deal with this internally.

[243] And now he's saying, it looks like the prosecutors went on a fishing expedition.

[244] And at the beginning, all they had were a couple of minnows, but now they've got the big fish.

[245] I'm struck that Carlos Cohn is celebrated for so long for having broken the mold, because that's what creates this big success inside Nissan.

[246] And people seem to embrace all that mold breaking, but then say to him, you need to fit the rest of the mold culturally.

[247] especially around money.

[248] And that happens to coincide with the company that had been such a success starting to tank.

[249] Right.

[250] I think in a lot of ways, and perhaps this is not unique to Japan, that you can get away with whatever you want as long as you're successful.

[251] And once you're not so successful anymore, then all that rule breaking and brashness doesn't look so attractive and appealing anymore.

[252] So I think that may have been part what happened to Carlos Gown.

[253] I think there's another thing operating here, which is that he really fundamentally represents a different way of looking at leadership.

[254] Japanese corporate culture is very consensual.

[255] And he even references this in his video.

[256] He sort of says something along the lines of what you call dictatorial is just good leadership.

[257] And what we need to do is what's good for the company, not just something we can agree upon.

[258] And that's really like taking a big, you know, water gun and pointing it right at the center of what is one of the most valued ways of doing business in Japan, which is that everything is decided by consensus, or at least you give the appearance of everything being decided by consensus.

[259] And he did not pay attention to that.

[260] And so I think that's a lot of where the cultural clash is coming from.

[261] And he's really being defined about it.

[262] Like he's going to go down kicking and screaming and he's not going to give up on.

[263] Wanting to say, I was a very good, I am a very good leader, and you don't recognize it.

[264] And you're calling me a dictator, but all I am is trying to show visionary leadership.

[265] Can we see this, Motoko, as Nissan kind of prioritizing the preservation of Japanese culture over saving the company itself?

[266] I think that there's part of it that is about Japanese.

[267] culture wins out above all that if you're going to be in Japan, you need to learn to adhere to Japanese culture.

[268] I think there is a part of it there.

[269] I also think that in this particular case, he probably would have continued to get away with it if that's the way of putting it or been allowed to behave as he does if the company was continuing to be successful.

[270] But it was starting to slow down.

[271] There were signs that the magic had gone.

[272] And so then the mold breaker is no longer looked at as a success story, but more as someone who needs to be brushed aside and let's go back to the old ways.

[273] We know how to do things here.

[274] Motoko, thank you very much.

[275] We appreciate it.

[276] Thanks so much for having me. We'll be right back.

[277] Here's what else you need to know today.

[278] A massive fire at the Cathedral of Notre Dame, an 800 -year -old monument to Catholicism and architecture in the center of Paris has destroyed most of the building's roof, central spire, and interior.

[279] The fire began around 6 .30 p .m. local time in an area of the cathedral covered in scaffolding and quickly spread across its wooden roof, which dates back to medieval times.

[280] The cause of the fire is unknown, but authorities said it was likely connected to a major renovation project.

[281] Thousands of Parisians watched the fire in horror, with one witness telling the times through tears, quote, we lose this, we lose Paris.

[282] It is apocalyptic.

[283] That's it for the daily.

[284] I'm Michael Bavarro.

[285] See you tomorrow.