By: Todd Crowell

Although lionized by the CEO class, Carlos Ghosn (pronounced Gone) was never very popular in Japan. The Brazilian-French business executive was famous for saving the Nissan Automobile Company from bankruptcy, but at a cost.

His methods, including severe cost cutting and layoffs, while complaining that he personally was being underpaid, certainly didn’t endear himself to the average Japanese on the street.

So when he was confronted and arrested by officers of the Tokyo Prosecutors office on the airport tarmac after arriving back in Japan, handcuffed and spirited to a detention house (same one where the AUM nerve gas attack perpetrators were hanged) some thought he had it coming.

The current CEO of Nissan, Hiroto Saikawa, had accused Ghosn of using corporate money for his own personal use and for underreporting his income for years in filings with the Tokyo Stock Exchange. The alleged under-reported income over five years amounted to about US$44 million, Saikawa said.

Ghost was arrested but as of this writing has not been formally charged with the crime of providing false information on stock market-related documents.

So long as he is not formally charged, he can be held almost indefinitely under Japanese law. Since his arrest on Nov. 19 he has been detained virtually incommunicado in a spartan cell with only a futon (Japanese bedding) to sleep on for 37 days. He was recently given a pillow.

But instead of Ghosn being the heavy in this story, a new heavy has emerged,  in the form of Japan’s justice system. And when Ghost inevitably is seen in public again, even if only to appear in court, he is likely to look haggard from his ordeal, which will not look good for the criminal justice system. That should make him more sympathetic

Under Japanese law, a suspect in a crime may be held in detention for up to 23 days without being formally charged. Prosecutors can extend this period in 10-day increments by re-arresting the suspect, which they have done several times since the original arrest.

Once Ghosn is charged with a crime, he can apply for bail. But being a rich man with three passports and homes in various parts of the world, it might be hard to argue that he is not a flight risk. Bail could be in the hundreds of million yen, assuming he gets it.

The Ghosn affair sheds new light on how persons accused of crimes are treated in Japan. This includes large, open-ended interrogations (without having a lawyer present), designed to elicit confessions. Ghosn is said to have been interrogated for full, eight-hour days with only a few interruptions.

“By going after a high profile and slightly disliked figure like Ghosn, Tokyo prosecutors are trying to varnish their diminished reputation as Japan’s elite crime-fighting agency,” said Jake Adelstein, a major crime reporter in Tokyo.

Ghosn’s hiring as president of the money-losing Nissan Corp, had been hailed as an example of globalism in Japan’s closely-knit and insular automotive world. The fact that he is a gaijin (literally outsider) didn’t help.

But in saving Nissan he violated a couple Japanese taboos. One of them was the closing of factories and laying off thousands of factory workers. He boasted of furloughing Nissan employees, even while issuing the complaints that he was being underpaid.

To some Japanese, even today, Ghosn isn’t the miracle worker who saved Nissan from bankruptcy but the man who coldly laid off 22,000 workers.

It is of course, true that these sanctions probably saved Nissan and, of course, the thousands of jobs, but could it have been handled differently. A Japanese upper management in a similar situation would have slashed their own salaries to atone for the layoffs. Ghosn raised his.

Under the old Japan Inc, the Ministry of International Trade and Industry (Now Ministry of Economy, Trade and Industry) would have banged some heads together and merged Nissan with another healthier concern.

From the beginning of his time at Nissan in 1999, Ghosn complained constantly about the traditional Japanese attitude toward compensating managers based on seniority not performance. Ghosn’s pay far exceeded that of his counterparts in Japan. As chairman of Nissan in 2017 he received a reported Y735 million  (US$6.76 million), more than four times the pay of the Toyota chairman (but below that of the chairman of General Motors).

Writing in the Harvard Business Review in 2002 Ghost said of his tenure, “In the traditional Japanese compensation system managers receive no share options, and hardly any incentives were built in the manager’s pay packet. We changed all of that.”

Even today nearly half of the Japanese CEOs’ pay is based on salary rather than stock options. The figure for the U.S. is 10 percent. It has been suggested that a frustrated Ghosn simply took things into his own hands by under-reporting his earnings.