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Analysis, Economics

Nissan to face challenges in setting up new leadership

The company will have to balance its desires with partners Renault.


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Updated: November 26, 2018

After dismissing Carlos Ghosn as representative director and chairman, Nissan Motor Co. is moving toward building a new management structure, a task expected to face challenges as it must take Renault SA’s desires into consideration.

According to sources, Nissan has an agreement with Renault, Nissan’s largest shareholder, that someone from the French company will fill a top executive role at the Japanese automaker.

Leaders from the alliance between Nissan, Renault and Mitsubishi Motors Corp. are scheduled to meet this week to hold discussions.

For Nissan, the immediate focus is to name a successor to Ghosn.

Currently, the company has no chairman after his dismissal was decided at an extraordinary board meeting on Thursday.

The automaker’s articles of incorporation, which govern its organization and activities, stipulate that a chairperson or cochairperson call and chair meetings of the board of directors. As Ghosn’s arrest was an emergency situation, Thursday’s meeting was called by another director.

Nissan aims to decide on a successor as soon as possible to return its management to a normal situation.

At the extraordinary board meeting, it was decided that a committee made up of three outside directors would select and propose Ghosn’s successor from among the current directors. The panel’s proposal will be made at a board meeting in December.

How Nissan will honor its agreement to have a top executive from Renault will likely be an issue.

The online edition of The Wall Street Journal reported Thursday that prior to the extraordinary board meeting, Nissan told Renault that it would not allow the French company to name Ghosn’s successor.

Nissan is also considering holding an extraordinary shareholders meetings before its regular meeting in June to dismiss Ghosn and Greg Kelly as directors. Kelly was also arrested in connection with the Ghosn case.

Dismissals of directors must be approved at a general shareholders meeting. However, it is unclear how Renault will respond, as the French firm has decided not to dismiss Ghosn as its chief executive officer.

Selecting new directors, who will be nominated at the extraordinary shareholders meeting, would be difficult without Renault’s approval. To obtain Renault’s understanding, Nissan is considering sending President and Chief Executive Officer Hiroto Saikawa and other executives to France to offer an explanation.

However, Saikawa and other board members could face questions if they remain as directors because of their responsibility in allowing Ghosn’s financial misconduct. Nissan is expected to set up a third-party panel to propose improvement measures on corporate governance and executive compensation.

‘Distorted’ capital ties

Top executives from Nissan, Renault and Mitsubishi are scheduled to meet this week in the Netherlands, where a venture overseeing their alliance is located. This is a regular meeting that had already been scheduled before Ghosn’s arrest, and those who cannot attend in person can take part via videoconferencing, according to sources.

Renault has the power to select the leader of the venture. As Ghosn has handled strategy for the alliance thus far, future management of the alliance will likely become a challenge.

Nissan wants to reexamine its capital relationship with Renault, which currently owns 43.4 percent of Nissan, while the Japanese company only has a 15 percent stake in its French partner. A senior Nissan executive described this capital relationship as “distorted.”

Meanwhile, the French government, which owns 15 percent of Renault, reportedly wants to see the two automakers build stronger ties to achieve an alliance “that cannot go backward.” As such a development could bring more jobs to France, its government is unlikely to allow Renault’s influence over Nissan to decline.



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The Japan News
About the Author: The Japan News is published by The Yomiuri Shimbun, which boasts the largest circulation in the world.

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