By Bruce Aronson
It’s no surprise that the dramatic story of Carlos Ghosn—who went from turnaround hero at Renault and Nissan to accused criminal who fled Japan hidden in a music instrument case—would be turned into a Netflix documentary titled Fugitive: The Curious Case of Carlos Ghosn (released November 2, 2022).
Having studied this case from a legal perspective with regard to Nissan’s corporate governance, Ghosn’s executive compensation and Japan’s criminal justice system, students in my Japanese Law and Society Seminar at NYU School of Law were interested in seeing how Netflix’s new Ghosn documentary handled these complex issues—and in having a chance to grade someone else for a change.
We recognized that we could not judge the documentary too harshly based solely on its handling of legal issues. After all, Netflix’s main purpose is entertainment. There were also constraints on whose views could be represented—both Ghosn and Japanese prosecutors refused to be interviewed for the film. But we were curious about whether the documentary would take advantage of a dramatic topic to “sneak in” lessons about Japanese law and society. Would there be the equivalent of Margot Robbie in The Big Short telling us about mortgage-backed securities and collateralized debt obligations while sipping champagne in a bubble bath?
Here is how the class graded the documentary, starting with some overall reactions, followed by assessments of how it handled the issues of corporate governance, executive compensation, misuse of company funds, and criminal justice. Some students submitted comments in writing, while the more irreverent comments come from spontaneous class discussion.
1. Overview
Background
Dispatched to a failing Nissan by Renault (which purchased a 43% controlling interest in Nissan in 1999), Ghosn devised an aggressive restructuring plan for Nissan that produced one of the most dramatic turnarounds in the history of corporate Japan: although 21,000 jobs were eliminated in a plan that was drastic by Japanese standards, profitability was restored in only two years. As a reward for his success, Ghosn became the only person in modern history to become the head of two major corporations (Renault and Nissan) simultaneously; he also became a famous figure in Japan.
However, Nissan’s performance and profitability were inconsistent in the 2010s. Nissan was falling behind the international competition, and one longstanding proposal to strengthen the alliance between Renault and Nissan was to carry out a full merger. But any Renault “takeover” of Nissan was opposed by executives at Nissan who still viewed it as an iconic Japanese car company which, in fact, was outperforming Renault.
It was later alleged by a whistleblower within Nissan that Ghosn had failed to disclose his full compensation and misused company funds for his personal benefit. Ghosn (and his aide Greg Kelly) were arrested in November 2018 when they flew to Japan to attend a board meeting.
What the documentary said
The documentary was entertaining, but focused tightly on Ghosn’s personal narrative. It emphasized Ghosn’s transformation from a frugal, cost-cutting nerd to a high-spending, corporate sophisticate (including a hair transplant, Lasik eye surgery and new suits). Interviewees mainly consisted of Nissan officials and journalists. Since Ghosn did not sit for an interview with the filmmakers, his views, in addition to numerous video clips, were represented by an actress who made periodic comments giving Ghosn’s side of the story. Other moments seemed like a stretch—including a series of interviews with Ghosn’s Japanese housekeeper.
Student comments
How many times did people mention Ghosn’s hair transplant? Is that important??
The strong focus on Ghosn’s personal narrative was to the detriment of many of the larger power dynamics and institutional factors at play in the case.
Really? Ghosn’s housekeeper??
Why is everyone else interviewed in a professional office setting, while Ghosn’s housekeeper is seen standing behind an ironing board with shirts??
The fond reminisces of Ghosn by his housekeeper do not appear to represent the view that most Japanese people had of Ghosn (as an egotistical autocrat).
The use of a young funny actress to enliven some of the drier details of the story was a good choice.
[Spoiler alert] Toward the film’s end, there is a brief, sudden segment that suggests that Ghosn’s father was a murderer. It seemed entirely out of context. What was that about?
Many possible conspiracies are thrown up in the air—Ghosn ousting his mentor at Renault, Ghosn using corporate funds to support his lavish lifestyle, Ghosn plotting his escape, Nissan executives plotting to oust Ghosn—but the documentary lands on none of them as a central theme.
What we wish they had said
Was Ghosn a hero for rescuing Nissan or a villain by exercising total control and lining his own pockets? The controversy in this case was amplified by two opposite views in the media: while the Japanese press portrayed Ghosn as a greedy autocrat, the Western media saw him as the victim of a coup inside Nissan to avoid a merger with Renault. Could both views be true?
2. Corporate Governance
Background
Renault seemed quite content to let Ghosn exercise unusual formal authority, such as individually deciding the nomination and compensation of directors. Ghosn’s power became increasingly entrenched over his time as Nissan’s leader, and he reportedly dominated the board of directors. There is a good reason why CEOs generally do not serve for as long as 20 years: a CEO who starts out being an effective company leader may, over time, end up being surrounded by yes-men and treating company assets as his own.
What the documentary said
The documentary mentioned two relevant points: (1) although the relationship between Renault and Nissan is described by the two companies as an “alliance,” in reality Renault owned a controlling share of Nissan, and (2) during board meetings Ghosn talked and everyone else waited to be called on by Ghosn. At the same time, the focus was on Ghosn’s personality and not on corporate structure and processes.
Student comments
The documentary made it sound like Ghosn stayed on at Nissan for a long time because of his success; in reality it was due to a structural corporate governance problem--Renault’s control and grant of broad authority to Ghosn, and Renault’s continuing support of Ghosn no matter what.
They should have emphasized that one of the main corporate organs expected to monitor Ghosn and other executives—Nissan’s board of directors—was totally under his control. This too was facilitated by Renault.
What we wish they had said
Two major factors contributing to corporate governance weaknesses at Nissan were the presence of a controlling shareholder, Renault, and the long period – nearly 20 years – of executive control exercised by Ghosn. Neither of these factors is common in Japan or the U.S., but Ghosn took full advantage of both factors to consolidate his unusually strong authority at Nissan.
3. Executive Compensation and Failure of Disclosure
Background
Japan and the US are at the two extremes in executive compensation among OECD countries, with the compensation for CEOs in the US being on average 10 times greater than for CEOs in Japan (Europe is somewhere in between). During the 2000s both GM and Ford tried to recruit Ghosn and offered him more money than the $16 million Nissan was paying him.
Beginning in 2010 Japan required companies to disclose compensation for individual officers and directors if their total compensation exceeded 100 million yen (around $1 million at that time). Fearing public criticism, the company disclosed Ghosn’s compensation at $8 million, half of what he had actually been receiving up to that point. Even at this level, public opinion in Japan (and in France) said it was excessive. Arrangements were allegedly made to pay Ghosn the “other half” after his retirement in return for “consulting services.”
What the documentary said
The documentary noted the discrepancy between the perception in Japan that Ghosn’s compensation was extremely high and Ghosn’s perception that he was underpaid compared to the CEO of Ford. It also noted that Japan’s new disclosure requirement brought attention to this issue.
Student comments
The documentary did a good job of explaining how Ghosn’s compensation was considered excessive in Japan, but made no real global comparison. It would have been nice to have a chart showing the compensation of global auto executives, or just how much was made by Ghosn’s predecessor at Renault.
When they just have Ghosn say he was underpaid it sounds self-serving. He was actually right (at least in comparison to the US) on this issue.
They should have followed up with the 2010 disclosure requirement. After Ghosn’s disclosed compensation was officially cut in half, what happened to the rest of it? It was tracked internally at Nissan, and the critical issue for the two criminal counts against Ghosn on false disclosure is whether Nissan actually agreed to pay that additional compensation (and if so, Nissan was obligated to disclose it).
What we wish they had said
Ghosn was both overpaid and underpaid due to the extreme difference in compensation standards between Japan and other countries. Even when Nissan cut Ghosn’s reported compensation in half due to new disclosure requirements, Ghosn was still the highest paid executive in Japan. But Ghosn knew he would have made a lot more money at a US car company. And what happened to the “other half” of Ghosn’s compensation? Did Nissan promise to eventually pay it to Ghosn? Did Ghosn try to partially make up for the “other half” through the use of unauthorized “perks?”
4. Ghosn’s misuse of company funds for personal purposes
Background
There were two counts of misuse of corporate funds. Ghosn ordered Nissan to make payments to distributors in Saudi Arabia and in Oman that were allegedly for personal reasons. In the case of Oman, some of these funds eventually found their way back to three different entities controlled respectively by Ghosn, his wife and (partially) his son. This “Oman route” was the most serious allegation since it involved direct benefit to Ghosn and his family from Nissan corporate funds. The main legal issue was proving Ghosn’s criminal intent—that he deliberately short-circuited normal corporate procedure for his personal gain.
What the documentary said
The documentary accepted the allegation that Ghosn wasted Nissan’s money. For example, he held an extravagant party on his 60th birthday at the Versailles Palace, paid by the company, supposedly to celebrate the Renault-Nissan alliance (but Ghosn’s predecessor at Renault, Louis Schweitzer, who picked Ghosn to be the new leader, was not invited). It also noted allegations that Ghosn benefitted from using company money in other ways, such as buying houses and embezzling funds intended for investment in startups.
Student comments
Louis Schweitzer looked so sad when he said that he wasn’t invited to the Versailles party!
The documentary blurred the line between corporate infighting and the crimes for which Ghosn was charged. It was not sufficiently clear whether Ghosn actually short-circuited normal corporate procedure for his own personal gain. Focusing on internal politics let Ghosn off the hook for his own wrongdoing.
What we wish they had said
In addition to lavish corporate spending for the party at Versailles and Ghosn’s houses, there is a very serious charge that Ghosn misused Nissan’s funds to compensate two of his friends who operated Nissan distributors in Saudi Arabia and Oman, and that in the case of Oman substantial funds were sent to other entities for the direct benefit of Ghosn and his family. These are the charges that resulted in Ghosn’s arrest and criminal prosecution.
5. Criminal justice in Japan
Background
This was the weakest point in the documentary, since no attempt was made to explain how Japan’s criminal justice system works and why it works that way. Japan’s ability to hold criminal suspects in lengthy pretrial detention is a legitimate target for criticism, but every country puts coercive pressure on defendants to confess or make a deal without trial. Here the lack of any expert voices was a problem; simply citing Ghosn and his attorney was not enough.
What the documentary said
The documentary criticized the Japanese criminal justice system for its “99% conviction rate.” Ghosn’s attorney called Japan’s strict pretrial detention and interrogation “hostage justice.” Ghosn accused Japanese prosecutors of having no interest in finding the truth, leaving him no choice but to flee the country. He claimed that he would have been happy to stand trial in France. There was a dramatic reenactment of his escape from Japan inside a musical equipment box.
Student comments
The presentation about a “99% conviction rate” and “hostage justice” were too one-sided. A statistic that flashed on the screen at the end, clarifying that most people arrested in Japan are released without indictment, was not enough to balance the picture.
Comparing Japan’s “hostage justice” to “Alice in Wonderland” where time moves backwards was good drama, but misleading. The US justice system has an equally high conviction rate when plea bargains are included.
The documentary did not mention that Ghosn’s refusal to cooperate was a factor in his lengthy pretrial detention, or that in the vast majority of white collar crime cases in Japan, the accused cooperates, expresses contrition, and spends no time in jail. Despite claims by Ghosn and his attorney, it does not seem that Ghosn was treated any differently because he was a foreigner.
What we wish they had said
There are numerous ways the documentary could have provided more balance, such as noting that: (1) every country applies pressure to process defendants out of the criminal justice system and avoid trial (the US uses plea bargaining to achieve this), (2) every country has a high conviction rate, (3) the case was unusual for Japan due to Ghosn’s total lack of cooperation and his flight risk, (4) a failure of disclosure would generally not lead to arrest in any country, but here Ghosn was accused of the more serious crime of misuse of corporate funds, and (5) French prosecutors later arranged for their own international arrest warrant against Ghosn, which resulted in Ghosn denouncing the French criminal justice system as well.
Final Thoughts/Grade
A substantial portion of the middle of the documentary involved problems at Renault in France during Ghosn’s tenure. Although interesting, this time could have been better spent providing a fuller picture of the issues in Japan raised in this review. The documentary was entertaining, but did not take good advantage of a teachable moment concerning criminal justice and society in Japan. For this reason, the documentary was only average. Students ranked it a B- to a B+, resulting in a final class grade of B.