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Carlos Ghosn vs Japan Inc.

Nissan Diesel Trucks (Photo: NZ Car Freak)

This weblog post is about Carlos Ghosn (1954 – ), the former CEO of the Renault-Nissan Alliance and his cultural war with the Japanese business establishment. It might have had a different plot if I hadn’t read Exposure: Silenced. Threatened. Time to Fight Back. (2012) written by Michael Woodford (1960 – ).

The major reason for writing this post now, is Ghosn’s escape from Japan to Lebanon. He had been charged in Japan 2018-11-19 with under-reporting his earnings and misuse of Nissan assets, followed 2019-04-04 with charges of misappropriations of Nissan funds. He has spent considerable time in detention, as well as house arrest. However, many suspect that these charges were more about Japanese business interests (aided by the Japanese government) wanting to take back control of Nissan, than that anyone was actually worried about the relatively miniscule size of misappropriated funds. The fact that a major Japanese auto manufacturer had to use the services of a gaijin (foreigner) had been extremely embarrassing.

Background

In 1996, Renault hired Ghosn to turn the company around from near bankruptcy. By 1999, the plan devised by Ghosn had worked. Much of it involved using Japanese management practices. In 1999 Nissan was facing a similar bankruptcy threat. In 1999-03, Renault and Nissan formed the Renault–Nissan Alliance, resulting in Renault purchased a 36.8% minority interest in Nissan. This allowed Ghosn the opportunity to develop the Nissan Revival Plan to turn around Nissan, using many of the same approaches as he used at Renault. By 2002-03-31 all of these goals had been accomplished. As of 2018-11, Renault owned 43.4% of Nissan, while Nissan owned non-voting shares equal to 15% of Renault’s equity, showing the unequal strength of the two companies in relation to each other.

This webpost does not proclaim Ghosn’s innocence. Only a court of law can do that, although there is a presumption of innocence until proven guilty. A legitimate question to ask is, what is the reason for the criminal charges against Ghosn? The problem with the Ghosn affair, is that Ghosn seems to be treated differently than equivalent Japanese business leaders caught up in similar situations. Here are some examples.

Fukushima

Perhaps the greatest Japanese crime of this century is related to the Fukushima Daiichi nuclear disaster that began 2011-03-11. This disaster was the most severe nuclear accident since the 1986-04-26 Chernobyl disaster and the only other one to be given Level 7 on the International Nuclear Event Scale.

The disaster caused meltdowns in three separate reactors. The lack of adequate preparations for a tsunami and related events resulted in the evacuation of more than 470 000 people. Nearly 18 500 people died in or were listed as missing from the disaster area. Despite the enormous ramifications of this disaster, Japanese society/ culture effectively blocked any one person or even group of people from being found responsible for it. Japanese prosecutors had twice declined to press criminal charges against former Tokyo Electric Power (Tepco) executives, saying there was little chance of success. Then a judicial panel ruled that three men should be put on trial, despite the opposition of the prosecutors.

2019-09-19 a Japanese court found Tsunehisa Katsumata, Sakae Muto, and Ichiro Takekuro, the former most senior executives of Tepco, not guilty of professional negligence. No one else has been charged with anything related to this disaster.

The conviction rate in Japan is 99.4%. In other words, the prosecutors are acting, effectively, as judges. In this particular case, their reluctance to prosecute was interpreted as an indication of non-guilt.

Olympus

Only a month after the Fukushima Daiichi nuclear disaster, Michael Woodford was appointed president and COO (2011-04) of Olympus Corporation, a Japanese manufacturer noted for its professional optical products. He was appointed CEO six months later, 2011-10. Woodford started working for Olympus in 1981 and subsequently rose in the company to manage its European operations. Woodford was the company’s first non-Japanese CEO. He was removed from his CEO position after two weeks, when he persisted in questioning fees in excess of US$1 billion that Olympus had paid to obscure companies, which appeared to have been used to hide old losses and appeared to have organised crime connections. By 2012 this scandal had developed into one of the biggest and longest-lived loss-concealing financial scandals in the history of corporate Japan.

Woodford’s life was threatened, because of the criminal organisation connections. Ultimately, Olympus had to agree to a settlement for defamation and wrongful dismissal.

Reactions

Japan Forward was sceptical of Ghosn’s arrest: “A Western businessman with several decades in Japan noted: The “thin gruel of ‘misdeeds’ that they’ve put forward to date as justification is laughable. Reads like any day at the office for many [Japanese] CEOs. The Japanese business establishment crushes everything that threatens its worldview and privileges. … Another added: “During my time in Japan, I met the CEOs and managing directors of a variety of companies and a few were wonderful people, but a lot were not…. [They were] in cahoots with the yaks (Yakuza) — abused their expenses, went on company paid junkets, received kickbacks, got laid on the company tab…. I don’t know what Ghosn did, but I doubt it would have come close to what is normal behavior for many of his Japanese counterparts.”

Japan Forward may not have said it so explicitly, using a question mark rather than an exclamation mark, but many see systemic xenophobia in the Japanese business community.

Nikkei Asian Review was even more condemning: “There is no indication that other board members made actual moves in terms of governance processes or statements at the board level, [Nicholas Benes, head of the Board Director Training Institute of Japan and a former investment banker] noted. This makes him suspect that the board members were more concerned about protecting their jobs than confronting [Ghosn]…. If individual board members, including CEO Hiroto Saikawa, felt so strongly about the issue that they allowed a criminal investigation, they should have taken steps first. These could have included proposing to discuss the issue at the board level, trying to call an extraordinary board meeting, threatening to resign or getting advice externally. No such internal moves appear to have been taken before the prosecutors’ move to arrest Ghosn. Under Japanese company law, directors are expected to actively participate in discussions and oversee the chief executive.”

There are several recent Japanese business scandals:

In 2015 Toshiba revealed that it had overstated its operating profit by nearly $1.2 billion.

In 2017 Takada had become mired in a global scandal over faulty airbags. Ammonium nitrate was used to inflate airbags quickly, some with such force, they spewed shrapnel at drivers and passengers leading to injuries and in some cases, death. Takada was forced to recall millions of airbags which, along with facing a multi-million dollar wave of litigation.

In 2017 Kobe Steel admitted to changing or falsifying data about the quality of some of its goods before they were shipped to customers.

In 2018 Nissan admitted its emissions and fuel economy tests for its cars sold in Japan had “deviated from the prescribed testing environment”.

Japan’s Criminal Justice System

Counterpunch has detailed the inhumanity and authoritarian nature of the Japanese criminal justice system. The current laws are from 1947. Except for omitting offences relating to war, the imperial family and adultery, the 1947 Penal Code remained virtually identical to the 1907 version. This means that there has been no substantial revision for 113 years, as this post is written in 2020.

Nobuo Gohara, a former prosecutor, stated: “If you admit to the crime you’re arrested for, you’re released on bail relatively quickly. However, if you dispute the charges or claim innocence, you will be detained longer. You won’t be released on bail and your detainment will last weeks. You’re basically held hostage until you give the prosecutors what they want. This is not how a criminal justice system should work in a healthy society.” Cases detailed in the same article explain this further.

Beirut Press Conference

At the press conference held in Beirut 2020-01-08, Ghosn compared his arrest to the surprise attack on Pearl Harbor. He said his prosecution on charges of financial misconduct was politically motivated, the result of an elaborate conspiracy involving malevolent Nissan executives and even the Japanese government, a systematic campaign to destroy his reputation and impugn his character. He further claimed that Japanese authorities were repaying him with evil, because he was an easy target as a foreigner. Further information about the press conference can be found in numerous online news sources, including this report in The Guardian.

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Democracy

Shawn W. Rosenberg claims that western democracy is devouring itself and won’t last. Rosenberg’s prognosis is that over the coming decades, western democracies will decline in number. Those that remain will become shrivelled pseudo-democratic incarnations of themselves. Right-wing populist governments will offer voters (and increasingly non-voting citizens) simple answers to complicated questions.

And therein lies the core of his argument: Democracy is difficult and requires effort from those who participate in it. It requires people to: respect those with different views from theirs and people who don’t look like them; process vast amounts of information and separate good from bad, truth from falsehood; apply thoughtfulness, discipline and logic.

While Rosenberg focuses his professional attention on what is happening, my amateur status allows me to fantasize on why. Once again, I will target the evils of conservative and libertarian economics, which has created a miniscule minority of winners, while it has also created an ever increasing mob of losers: People pressed into earning less than a living wage, whose time has been stolen from them, so they have little opportunity for rest (including proper sleep) and relaxation, let alone for the effort required to maintain a democracy.

Democracy is not a single, unified way of governing, but a family of approaches to government. American political scientist Larry Diamond, states that a democracy must fulfill four key characteristics: a political system for choosing and replacing the government through free and fair elections; the active participation of the people, as citizens, in politics and civic life; protection of the human rights of all citizens; a rule of law, in which the laws and procedures apply equally to all citizens. See: Larry Diamond and Morlino, L., The quality of democracy. In Larry Diamond, In Search of Democracy (2016).

Said another way, democracy can be operationalized in different ways, yet still fulfill these four basic elements.

The Economist Intelligence Unit’s Democracy Index provides a snapshot of the state of democracy worldwide for 165 independent states and two territories. This covers almost the entire population of the world and the vast majority of the world’s states (microstates are excluded). The Democracy Index is based on five categories: electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture. Based on its scores on a range of indicators within these categories, each country is then itself classified as one of four types of regime: “full democracy ”; “flawed democracy ”; “hybrid regime”; and “authoritarian regime”. (p. 2)

My position is privileged, living in Norway, the country ranked #1, in the latest published (2018) Index, and raised in Canada, tied at #6. Altogether there are 20 full democracies of 167 countries, representing 4.5 percent of the world’s population.

This weblog post is scheduled for publication 2019-10-29, the day that celebrates the 200th anniversary of the birth of the Báb, born Siyyid `Alí Muhammad Shírází (1819 – 1850), the first of two prophets in the Bahá’í Faith.

The Báb declared His mission on the night of 23 May 1844 in the upper portion of His house in Shíráz, Iran. This photo shows that portion before its destruction in 1979. Photo: Copyright © Bahá’í International Community

The principles of the Baha’i Faith include: gender equality; the harmony of science and religion; the need for universal compulsory education; the need for a universal auxiliary language; an obligation to independently investigate truth; and, the elimination of extremes of wealth and poverty. One of the appeals of the Baha’i Faith, when I first encountered it in 1972, was its administrative order, including its system of elections. Perhaps that is what Shoghi Effendi (1897 – 1957), Guardian (head) of the Baha’i Faith from 1921 – 1957, was aware of, when he implemented the current incarnation of a Baha’i administrative order.

This administrative order does not pretend to be entirely democratic. Shoghi Effendi stated that it incorporates elements of autocracy, aristocracy and democracy. His objective was to include “such wholesome elements as are to be found in each one of them…” while excluding the “admitted evils inherent in each of these systems…” so it “cannot ever degenerate into any form of despotism, of oligarchy, or of demagogy which must sooner or later corrupt the machinery of all man-made and essentially defective political institutions.”

Baha’i elections are at variance from standard western democratic practice. At the local, regional (uncommon), national and world level there are boards (Spiritual Assemblies/ House of Justice) each currently consisting of nine members. Nominations and campaigning are prohibited to guard against manipulation. Voters are discouraged from consulting with each other about the suitability of individuals. However, they are encouraged to study and discuss, in abstract, the qualities needed to serve, but without to individuals. Individuals should be voted for on the basis of their qualities.

Many thanks to Jeanette Livesay, who provided inspiration, and a link to an article The Shocking Paper Predicting the End of Democracy: Human brains aren’t built for self-rule, says Shawn Rosenberg. That’s more evident than ever by Rick Shenkman in Politico.

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Made without Repression

The Human Rights Logo combines the silhouette of a hand with that of a bird, and a white thumb grabbing the bird. It is intended as a peaceful contribution towards strengthening human rights and as such is meant to be used across cultural and language borders. The Human Rights Logo was designed in 2010 by Predrag Stakić from Serbia.

For the past twenty years, most of our computers have been made by Taiwanese companies, mostly Asus and to a lesser degree Acer. Our first smartphone was also Taiwanese, made by HTC. After that, we have had two Chinese phones made by Huawei and Xiaomi, respectively. Until now, we have not paid much attention to where these products have been physically made. That has now changed, due to the treatment of Hong Kong citizens, threats made to the government of Taiwan, and the increased militarization by China. The time has come to consider whether products made in China, or by companies owned – even partially owned – by the Chinese government, are in the world’s best interest.

If the choice is between cheap consumer electronics made in a dictatorship, or more expensive goods made in a democracy, I will opt for the latter, every time – except when my selfish nature gets in the way of my selfless ideal. Even without human frailty, most choices are a bit more nuanced. Of course, there is also an issue of sustainability, where the climate crisis is a major threat to human survival.

In this post, one of the first questions to be avoided is, what is a democracy? Instead, I will simply use the Democracy Index, first published in 2006 and compiled by the Economist Intelligence Unit (EIU). Despite its British (read English) bias, it measures 60 indicators (proxies) in five categories, from which it scores/ ranks/ categorizes 167 countries. The four regime categories are: full democracies, flawed democracies, hybrid regimes and authoritarian regimes. For further details see: https://en.wikipedia.org/wiki/Democracy_Index

South Korea is the highest ranking flawed democracy, at #21 on the EIU Democracy Index, immediately below Costa Rica, but higher than Japan (#22), and the United States (#25). Taiwan is ranked at #32, between Belgium and Italy, and is also regarded as a flawed democracy. China is ranked at #130, and is classified as authoritarian, although not as bad as Saudi Arabia at #150, or North Korea at #167, the worst on the list.

A more long-term trend analysis of democracy is MaxRange. It offers a dataset spanning 1600 to 2015 that has over 90 000 country-year observations, and from 1789 over 600 000 observations in its monthly format. These rank political regimes on a 1 to 1 000 scale. A Swedish language summary concludes: 1. Democracy does not grow out of nations but spreads between them. Thus, all types of non-democracies can eventually become democracies. 2. Muslim countries are slower than others to embrace democracy, but this only applies during the post-Cold War period. 3. For the entire period 1789 to 2013, prosperity plays a much greater role than religion in democratization.

In an accompanying MaxRange video, mention is made that while established (strong) democracies are becoming less robust, because of political polarization, corruption and constitutional violations, more countries are transitioning away from dictatorship towards weak democracy. Between 2006 and 2014, this trend was strongest in countries in Africa and Asia, but weaker in Europe and the Americas.

Human rights are more complex. In part, this is because these rights can come in conflict with each other, and with the exercise of democratic rights. Again, I will avoid detail, and try to look at a bigger picture.

Kenneth Roth, in his essay, The Dangerous Rise of Populism: Global Attacks on Human Rights Values, appearing in Human Rights Watch World Report 2017, states: “Human rights exist to protect people from government abuse and neglect. Rights limit what a state can do and impose obligations for how a state must act. Yet today a new generation of populists is turning this protection on its head. Claiming to speak for “the people,” they treat rights as an impediment to their conception of the majority will, a needless obstacle to defending the nation from perceived threats and evils. Instead of accepting rights as protecting everyone, they privilege the declared interests of the majority, encouraging people to adopt the dangerous belief that they will never themselves need to assert rights against an overreaching government claiming to act in their name.” (p. 1)

Todd Landman, in Democracy and Human Rights: Concepts, Measures, and Relationships (2018) argues that despite many achievements, there remain tensions between conceptualisations of democracy and human rights over the degree to which one includes the other, the temporal and spatial empirical relationships between them, and the measures that have been developed to operationalize them. These tensions, in turn, affect the kinds of analyses that are carried out, including model specification, methods of estimation, and findings. He concludes that greater care is needed to specify, conceptualize and operationalize measures and inferences used in addressing democracy and human rights.

Human Rights Watch World Report 2019, writes the following about South Korea: The Republic of Korea (South Korea) is a democracy that generally respects civil and political liberties. However, it maintains unreasonable restrictions on freedom of expression, association, and assembly. Discrimination against lesbian, gay, bisexual, and transgender (LGBT) persons, women, racial and ethnic minorities, and foreigners—especially refugees and migrants—continued to be a major problem in 2018.

The 2019 report does not have a chapter about Taiwan, and it doesn’t seem to be specifically mentioned in the chapter on China. Wikipedia reports the following: “The human rights record in Taiwan is generally held to have experienced significant transformation since the 1990s… [It] has a multi-party democracy. The 2000 presidential victory of Democratic Progressive Party (DPP) … followed more than 50 years of rule by the Kuomintang (KMT) and marked the first transition from one political party to another in the Taiwanese history. This followed gradual democratic reforms since the 1980s and 1990s…. Freedom House rates Taiwan as among the most “Free” nations in Asia, with a 1 in both Political Rights and Civil Liberties (scale of 1-7, with 1 being the highest). This represents a significant improvement, as the 1973 rating was 6.5, rising to 2.1 by 2000.

The Human Rights Watch Report 2019 states the following about China: China’s growing global power makes it an exporter of human rights violations, including at the United Nations, where in 2018 it sought to block participation of its critics. China again ranked among countries singled out for reprisals against human rights defenders, and in March successfully advanced a Human Rights Council (HRC) resolution on a retrograde approach that it calls “win-win” or “mutually beneficial” cooperation. In this view, states do not pursue accountability for serious human rights violations but engage merely in “dialogue”; moreover, there is no role for independent civil society, only governments, and a narrow role for the UN itself.

In terms of the climate crisis and sustainability, Greenpeace USA has written The Guide to Greener Electronics, an analysis of 17 of the world’s leading consumer electronics companies in terms of their environmental impacts, and where work still needs to be done. On a scale ranging from A (best) to F (worst), Fairphone is ranked best in the class with a B. This is followed by: Apple (B-); Dell, HP (C+); Lenovo, Microsoft (C-); Acer, LG, Sony, Google (D+); Asus, Huawei (D); Samsung (D-); and, Amazon, Oppo, Vivo and Xiaomi (F).

In terms of democracy, products produced in South Korea are preferable to those produced in Taiwan. Yet, the reverse is true if human rights are the focal point. In terms of environmental considerations, there appear to be no real winners, with the possible exception of Fairphone. Despite this, I will be looking much closer at where products are made, the human rights situation in those countries, and their democratic index ranking.

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Making something great!

NB: Much of this post was actually written in 2016, but has been updated and posted in October 2017.

A year ago, a politician in one of the world’s largest countries came up with a campaign slogan, “Make [name of country] great, again.”

“Wow,” I thought, “that is such a fantastic idea.” I slept well, reflecting on that smart slogan until, in some sort of dream phase in the middle of the night, I realized that the message had to be tweaked.

Why should it be just one country? So, I replaced [name of country] with the world, as in: “Make the world great, again.”

Make the World Great Again

I began to slept even better the next night, knowing that the entire world would be great, again – not just one or ten countries, but all 195! http://www.worldometers.info/geography/how-many-countries-are-there-in-the-world/

Then, during this intense dream phase, I realized that the message had to be tweaked even more. Unfortunately, the entire world has never been that great for everyone. Many people live in oppression. Many more people in the past also lived oppressed, impoverished lives. So, we have no right to add “again” to the phrase.

“Make the world great.”

The slogan was now so fantastic I imagined that it couldn’t be improved, ever. So, I spent the next day painting a banner. It was a banner that could be hung from my sundeck that all the world could see, at least that portion of the world that lives in Vangshylla, and can see the sundeck. Unfortunately, that day it didn’t just rain, it poured. Not a single soul could be bothered to look upwards into the sky to read the banner.

That evening, I was sure I would sleep through the entire night, without interuptions. Not even the honking of the geese overhead, flying south, would disrupt my slumber. It was true, the honking geese did not disturb my sleep. It was the banner, or more correctly, the slogan on the banner, that did.

The problem this time was not with the slogan. Rather, it was what was missing from the slogan. It didn’t seem fair that an Obama, or a Hilary or a Donald or even a Bernie should be stuck with the job of making the world great. If the world was to become great, then everyone had to contribute.

The next day I found more material so that I could add a second story to the original banner. It now read, “Working to Make the World Great!”

By now I had grown to expect waking in the middle of the night. Thus, it came as no surprise at all, when I woke up realizing that there were still challenges with the slogan. Yes, we can all work to make the world great, but I’d actually prefer you to do it my way, rather than your way. It took only a few minutes to come to the realization that “My Way or the Highway” is not a particularly mature approach to making the world great. Then, something unusual happened. I fell asleep.

Sometimes, allowing one’s subconscious to work on a problem is much better than any other approach. When I awoke in the morning, I felt refreshed. After breakfast, I looked at the banner and knew precisely what needed to be added. Within an hour the banner was finished. It was a sunny day, so people could look up and read,

“Working Together to Make the World Great!”

Postscript: There aren’t many people who live in Vangshylla, and even fewer who can look up and see the banner. That isn’t important. That slogan is actually addressed to just one person, myself, and changing my attitude to each and every person I meet.