This June, Carlos Ghosn, the boss of a French-Japanese automotive conglomerate, sat down for lunch with the Financial Times at an old-fashioned bistro in Paris.
As the interviewee dug into a € 40 chateaubriand steak, the FT broached the sensitive issue of Ghosn’s high remuneration. His pay had recently prompted a major row with the French government, which owns a 15 per cent share in Renault, an outpost of his empire.
“You won’t have any CEO say, ‘I’m overly compensated’,” Ghosn laughed. He’s not laughing now.
Or at least we can presume he’s not. Ghosn was arrested in Japan on Monday, accused of concealing the true value of his Nissan remuneration from shareholders over the last five years by 5 billion yen (£ 35m).
There are also allegations Ghosn benefited from the Japanese firm purchasing various luxury homes around the world for his personal use.
They are allegations at this stage, but this is clearly the end of the road for this titan of the automotive industry. Ghosn is already likely to be ousted from his leadership positions at Nissan, Mitsubishi and Renault.
That this scandal was unearthed in Japan might come as something of a surprise given that country’s reputation as a land of corporate secrecy and extreme deference. Yet a succession of level eight richter scale scandals – beginning with the Olympus affair in 2011 – appear to have precipitated a landslide of genuine reform when it comes to policing corporations.
Apparently, the Ghosn scandal was exposed by an internal Nissan whistleblower. This is one of the encouraging elements of the affair: it is hard to imagine a better advertisement for whistleblowing than this case, in which exposure of wrongdoing led to the downfall of one of the world’s most powerful and feted industrialists.
There’s another Japanese lesson in this. Chief executives in the country have not shared in the explosion of compensation relative to the workforce that we have seen among their counterparts in the US and the UK since the 1980s.
That’s one of the reasons why the (pre-tax and post-tax) income share of the top 1 per cent of earners has not soared in Japan as it has in the Anglophone world.
Sometimes we’re told that the rise in this form of equality is inevitable due to inexorable global market forces such as technological advance, scalability and fierce competition for the finest management talent.
In fact, the rewards that corporate bosses receive across the world still depend mostly on local pay “norms” – the social acceptability about how much some company employees get relative to others. Those norms, for various reasons, have been distorted more in some countries than others. And Ghosn’s greed appears to have exposed him in Japan.
But let’s not rewrite history to suggest that this was someone widely seen as heading for a fall. Ghosn was lauded by the business media around the world like few other figures; he was the subject of countless fawning profiles.
And even Japan was infected by the cult-like atmosphere around him. He featured in a manga cartoon comic book and his face adorned a bento lunchbox. One poll in 2011 suggested many Japanese people would like him to run their country.
This adulation was excessive. As effective as “Le Cost Killer” might have been as a manager and strategist, it was always ludicrous to present him as single-handedly responsible for turning around the fortunes of these giant companies. Too many people in business, markets, politics and the media who ought to have known better were caught up in that simplistic presentation.
Venerating business leaders as gods not only leads to hubris on their part, it also interferes with our moral sensibilities and misleads the public about the true sources of our prosperity. And there really is nothing funny about that.