Fidelio Table Talk – “Cars, Governance & Major Surprises”

On the week beginning 19th November it was clear to all living in the UK that the political and business headlines for the week ahead would be dominated by Brexit. Imagine our surprise when the next day a completely different headline was splashed across the front page of the business press: the Chairman of the Renault-Nissan-Mitsubishi Alliance had been arrested at the airport in Japan and was subsequently removed fr om his position for allegedly misusing company assets for personal gain.

For those who have worked in the car industry, this turn of events and fall from grace was the stuff of Greek mythology. Carlos Ghosn, who came to the helm at Renault in the 1990s, earning the title of ‘Le Cost Killer’, was seen as the lynchpin of the alliance which stabilised Renault, Nissan and Mitsubishi and created one of the largest car manufacturing groups globally. At the time a unique partnership, this complex cross-shareholding agreement has subsequently been taken as a template by other auto manufacturers – albeit with mixed success.

More than a week later, facts remain murky about the circumstances leading to the arrest. It seems that there is much going on beneath the surface, with different agendas at play. Each Board has had to respond. Nissan and Mitsubishi have been categoric in their response: parting with the Chairman; contrasting with Renault, which, whilst appointing an acting CEO, has (to date) not removed Ghosn from his role.

This is clearly a Boardroom drama of both global and epic proportions, which has yet to unfold. But there are at least three strands we can identify at this early stage which have much broader implications for quoted companies globally.

1. Remuneration. Executive pay has become a touchstone internationally. According to media reports Carlos Ghosn has been accused of understating remuneration by many millions since being in office. Whatever the rights or wrongs of this individual case and whatever lies behind it, it demonstrates that remuneration is a lever that can be used to investigate and topple the most high-flying executive. Indeed, this has proven to be the case even wh ere there is no allegation of wrongdoing, just a sense that rewards are being unevenly/unfairly distributed. The Chair of the Remuneration Committee has just become an even more uncomfortable seat to occupy – and one requiring careful preparation.

2. Tenure and governance. Much has been made of early statements by Carlos Ghosn of the importance of limited terms of office and fresh blood and perspective at the top table. Of course, talented business leaders have a disproportionate impact on the success of their businesses but, across the globe, governance codes are making it possible for disgruntled shareholders and stakeholders to insist that even great captains of industry or visionary founders of technology observe the general principles of governance.

3. Disruption. While the analysis of the palace coup at Renault and Nissan has focussed on governance, pressures within the business have almost certainly played a major role. There is speculation that a much closer association was planned, and so political stakes were high. But looking one level deeper, the automotive sector is being profoundly disrupted with three major trends coming together:

  • Electric vehicles
  • Driverless cars
  • A radical shift in ownership models.

As we have written previously, do not be surprised to see further Board level upheaval in the automotive sector!

To learn more about how Fidelio supports Chairs to build Boards fit for the future through Evaluation, Development and Search, including effectively chairing the Remuneration Committee, please contact Fidelio.