At Struggling Nissan, Ghosts of Ghosn Incident Hinder Management

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Struggling Japanese automaker Nissan Motor Co has decided to replace its CEO and inject fresh blood into its executive board. But even with the changes, there is little hope for a fundamental recovery in competitiveness.

The company's worsening performance and failure to negotiate a business alliance with Honda are a direct result of the board's decision-making. It appears necessary to reform Nissan's very governing structure itself, which is unable to respond quickly to shifts in the management environment.

The latest changes, announced in March 2025, are entirely insufficient.

Executives Selected by Company Outsiders

The Nissan board of directors consists of 12 members, including eight independent external directors, two from Renault, the company's major shareholder, and only two internal directors from Nissan, President and Chief Executive Officer (CEO) Makoto Uchida, and Executive Vice President Hideyuki Sakamoto.

The nomination committee, which is responsible for selecting the president and other executives, is composed of four outside directors and one member from Renault, effectively consisting entirely of company outsiders. The chairman of the board of directors and the chairman of the nomination committee are also external directors.

*Nissan Motor CEO Makoto Uchida (left) and his successor Ivan Espinoza hold an online press conference on March 11, 2024. (©Kyodo)*

Rivals Pick Execs From Within

In contrast, Toyota Motor Corporation and Honda Motor Co have Chairman Akio Toyoda and President Toshihiro Mibe, respectively, serving as chairmen of the board of directors. At those companies, internal directors also participate in personnel and compensation decisions.

Nissan's management, led by outside directors, is an exception. The company switched to a committee-based governance structure in 2019, in the wake of the arrest of former CEO Carlos Ghosn for alleged financial violations.

Under this structure, business execution was completely separated from company supervision. Nissan's executive committee, composed of company executives, is responsible for making direct business decisions such as those related to product strategy. The board of directors supervises management.

A board of directors made up of a majority of external members has a high degree of independence. It signals a strong check against dictatorial management.

However, the automotive industry is said to be undergoing a "once-in-a-century" transformation. There are industry insiders who point out the drawbacks of relying too much on outside directors, noting that "it is a tough time for amateurs in the automotive business."

Poor Results Without Accountability

Nissan's interim financial results for the six-month period through September 2024 showed a 93.5% decrease in net profit compared to the same period of the previous year, highlighting its severe difficulties. However, the board of directors has not been able to show its presence and fulfill its role of supervising management.

Jeremie Papin, who led North American operations and instituted discount sales which worsened performance and damaged the brand, was not held accountable. He was laterally moved to Chief Financial Officer (CFO) while keeping his position on the executive committee.

Papin remains part of the new leadership structure. The nomination committee even briefly considered him as a candidate to succeed CEO Uchida.

Complex Management Hurt Honda Deal

It was the board of directors, as the highest decision-making body at Nissan, that decided to enter management integration negotiations with Honda. Work on specific measures for the restructuring plan was left to the executive side.

These measures included a reduction of 9,000 personnel and a 20% reduction in production capacity (a prerequisite for the integration), difficult decisions for the executive committee. This two-tiered governance structure appeared to lack the speed required for managing the company.

Toyota, Honda Have United Management

At Toyota, Chairman Toyoda and President Koji Sato use messaging apps to routinely share management issues and a sense of crisis with executives. Honda has a unique tradition where the president and executives freely and openly discuss matters in a large conference room.

At both companies, the top leaders who head the board of directors are united with the executive team, leading to quick decision-making and action. In comparison, Nissan's governance structure, which emphasizes governance lessons learned from the Ghosn incident, does not seem optimal for the current turbulent competitive environment.

Nissan's Board Needs Redefined Role

Many believe that cost reductions through alliances with other companies are necessary for Nissan to improve its business performance. However, even if Honda does not turn out to be its partner, there are lingering concerns that sluggish decision-making under the two-tiered governance structure will hinder a collaborative effort.

What is important for Nissan's reconstruction is not the personal ability of the president alone, but the very role of the board of directors.

(Read this article in Japanese.)

Author: Noboru Ikeda, The Sankei Shimbun

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