Planet Money - Corporate Fugitive: Carlos Ghosn

Episode Date: June 23, 2021

Japan once served sushi in the shape of Carlos Ghosn's face. Then Japanese authorities arrested the celebrity CEO who remade Nissan. We bring you first hand accounts of his spectacular rise, sudden fall and dramatic escape. | This episode is a collaboration with HBR IdeaCast.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. On November 18, 2018, Carlos Ghosn was arrested in Japan. Ghosn was the CEO of not one, but two global automakers at the same time. Nissan in Japan and Renault in France. Before his trial, Ghosn was being held and interrogated in a concrete prison on the outskirts of Tokyo. This was a man who was used to jetting around the world to his palatial homes in Paris, Beirut, and Rio, all paid for by Nissan. Now, he got a 15-minute limit on his bathing time and a hard futon in a cell, all paid for by the Japanese government. For a short time,

a cell, all paid for by the Japanese government. For a short time, journalists could visit him in prison. So he was wearing civilian clothes, in a way. Some sport pants and a big sweater. Yann Rousseau is the Tokyo correspondent for France's business newspaper, Les Echos. He was one of the very few reporters to visit Ghosn while he was in prison. And he had some kind of flip-flop, the one you use here in Japan when you go to a public bath, because he couldn't have his nice shoes. He was like that, but he was still very classy.

His hair was a little grayer and messier, because, you know, he used to put dark... How do you say? Dye, dye or coloring, yeah. He was dyeing his hair black to look younger. He was still strong. He was not complaining that hair black to look younger. He was still strong. He was not complaining that much. They didn't have much time together.

One guard stood right by, writing down everything they said. Another guard stood in the back of the room with a stopwatch. It's Japan, so it's 20 minutes sharp. It's not 1955. It's not 2005. It's 20 minutes sharp. So the guy was telling us 10 minutes left, 5 minutes left. So Ghosn wanted to talk a lot, a lot.

And I feel he felt good to let go. And for the first time, we are hearing his official defense version. That was the first time he was out there. Ghosn would go on to share his official defense version in this video statement. The first message is I'm innocent. Innocent of allegedly underreporting his pay by millions of dollars, transferring his personal financial losses

to Nissan's books, misusing company assets, and funneling $5 million from a subsidiary for personal gain. I'm innocent of all the charges that have been brought against me. And I'm also innocent of all the accusation that came around these charges that are all biased, twisted in a way to paint a personage of greed and a personage

of dictatorship. In the video, Ghosn says that he is the real victim here, that he'd been working to merge Renault and Nissan more closely, but that the executives at Nissan and the Japanese government did not want that. That is why, he alleges, they are conspiring to stop him. Finally, what I would like to say is my big hope, my biggest wish, is to have a fair trial. A few months later, as you might remember, Ghosn decides that he's not going to have a fair trial. A few months later, as you might remember, Gohn decides that he's not going to get a fair trial in Japan. So before his trial begins, he leaves his Tokyo home and rendezvous with a former Green Beret and his son, a duo who specialize in getting people out of places where they don't want to be.

The dad-son team has prepared a music equipment box, the kind you see roadies pushing around at a concert. The box has got a few holes drilled into the bottom so Goan can still breathe, like a firefly in a jar. He climbs into the box and he's wheeled into the airport through a private jet terminal, so it bypasses security. Then, this very, very expensive piece of cargo is loaded onto a jet, which takes off and flies towards Lebanon, a country that happens to have no extradition treaty with Japan. Hello, and welcome to Planet Money. I'm Amanda Aronchik. And I'm Kurt Nikes.

Kurt is the host of an excellent new four-part podcast series called The Rise and Fall of Carlos Ghosn. It's from the Harvard Business Review show, HBR IdeaCast. And Kurt has spent months looking into one of the strangest corporate stories that I've ever heard. It's about a famous CEO, so famous there is a bento box named after him, and the famous CEO's escape from Japan. In a box, not a bento box. Today on the show, how did Carlos Ghosn go from being one of the world's most admired CEOs to a fugitive from justice? And what happens when a flashy Western-style CEO meets a culture used to equality and harmony at work. And yes, we talked to Carlos Ghosn, the fugitive, himself.

A good place to start the story of what went right and what went wrong during Carlos Ghosn's time at Nissan is with the person who put him there. After a few voicemails and emails, I got him on the line. Oh, okay. My name is Louis Schweitzer. I am now 78 years old and I have had a varied career, civil servant, company, and not-for-profit

institutions. That's a modest way of putting it. Louis Schweitzer was the chief of staff for a prime minister of France before going to the French carmaker Renault. You may remember one of their best-known models. It was called Le Car. Really, that is what it's called. To his credit, Le Schweitzer joined the company after Le Car. He became the chair and CEO in 1992.

And like a responsible executive, within a few years, he was already thinking about who would succeed him. There were very good people within Renault, but none that I considered able to become the CEO. Schweitzer needed a deputy. Renault was in debt, in danger of bankruptcy. Critics called Renault a bloated ward of the French state. And Schweitzer needed new blood to help him turn the company around. And he finds Carlos Ghosn.

In his early 40s, born in Brazil, raised in Lebanon, educated at the top universities in France, and clearly outstanding. Schweitzer knows right away he's found his guy. Well, he was a very impressive person with a stamina, a drive, an intensity, which I found quite extraordinary. I told him immediately that if he succeeded, he would be my successor. In 1996, Schweitzer hires Ghosn as his deputy. Over three years, Ghosn undertakes huge organizational changes, streamlining production, closing a factory, and centralizing key operations. Ghosn proves himself to be super rational, super numbers-driven, and extremely good at saving the company's money.

He's also kind of an oddball. He does not seem like a creature of the auto industry. That is Sonari Glinton. He used to be NPR's auto industry reporter. You may have heard him on the show before. He's interviewed Ghosn a bunch of times. There are only two people in the auto industry in the decade or change that I was in it that I thought, this dude is a thinker.

He's like an intellectual running a car company. That's the difference. That is what makes him different from other folks. Sonari says the auto industry is full of executives who are stereotypical car guys or engineers who make their way up the ranks. Carlos Ghosn just stood out in ways you wouldn't expect. The average height of a CEO is definitely over 5'11". He is not. I don't know how tall he is, but I know he is not a tall, imposing person. And he makes up for that by being genuinely gregarious, interested in you, sort of hyper focused. He has these really bushy eyebrows. And he's like just a small, intense person. Like the person that kind of leans in a little much.

Ghosn's turnaround at Renault was so successful and so rapid, people started calling him the cost killer. And this was at a time of consolidation in the auto industry. Making cars is expensive and big companies were teaming up to try to save money and reach more buyers. In 1998, there was this blockbuster deal, the so-called merger of equals, between Mercedes-Benz in Germany and Chrysler in the U.S. And for someone as ambitious as Ghosn, as Louis Schweitzer puts it, Renault started to feel... Too small, too French, too alone. So the small, French, and alone Renault starts looking around for its own corporate dance partner.

As it happens, one of Japan's biggest car makers, Nissan, was in dire straits. Nissan was losing heaps of money. So they needed somebody to cut the costs. Massively. Schweitzer's like, I have just the guy for you. The cost killer himself? Carlos Ghosn. So Renault will use some of the pile of money they just saved in their own turnaround to help retool Nissan. They'll spend $5 billion to buy up more than a third of the company, and they frame the whole deal as an alliance, not a merger.

I don't know. Can we just stop and comment on how unlikely this all was? Nissan was exporting millions of cars around the world. Renault was tiny in comparison. And sending a senior executive from France to go to Japan to help them do a better job of making cars, that's like sending somebody to France to tell them how to make baguettes. Also, Japan had very few foreign executives.

And it wasn't clear how Japanese corporate culture would react to the arrival of this brash executive from France. This alliance with Nissan was a huge risk for Renault. This was their big shot at breaking out of the French market. And all of it was riding on one dude. I discussed with Carlos before him leaving for Tokyo after the deal was made. I told him, look, of course, if you do not succeed, we will both lose our jobs. In 1999, Carlos Ghosn takes a small team from Renault to Japan to clear the managerial fog that had taken over Nissan.

He is a force from the get-go. He sets aggressive goals. He cuts ties to some of Nissan's longtime but very expensive suppliers. Ghosn gets people in different departments to work together to figure out where to cut costs. And he promotes people based on merit instead of seniority, which had been the tradition. And he does all of this with a ruthless focus and discipline. There's a saying in France that someone has a clock in their stomach, and that was all Ghosn, churning through one problem after another,

slicing complex business problems into 15-minute meetings. People told us in Nissan, it's very easy with Ghosn. There's three subjects that interest him. Here's French journalist Yann Rousseau again. The first one is business. The second one is business. And the third one is business. So it's never personal.

It's always with journalists, with his team, with his colleague. It's all about business. He's very secretive. He has his family life. He doesn't mix the two. Within a couple of years, Nissan starts making money. A lot of money. Almost overnight, Carlos Ghosn becomes a corporate superhero.

Ghosn mania sweeps through Japan. He's featured in comic books. He was constantly giving interviews on TV. Newspapers dissected his management style. And yes, restaurants served those bento boxes with sushi laid out to look like his face. Ghosn is at the top of his game, always playing the showman, reveling in the big, exciting things

that were now happening at Nissan. At this Tokyo Motor Show, Ghosn drives onto the stage in a new silver sports car. The 57-year-old with jet black hair steps out, adjusts his cufflinks, and then launches into the cell. What you hear is the roar of Nissan's passion for performance. What you see is its ultimate physical expression, the all-new Nissan GT-R. Ghosn launches five new models of cars in about eight minutes. One moment he's hyping a high-performance sports car,

the next he's touting an electric vehicle, the precursor to the Nissan Leaf. In terms of emissions, though, ultimately it's got to be zero. Years ahead of the competition, Ghosn is pushing Nissan ahead with all-electric cars. The auto industry press reveres him as a visionary. Now, Ghosn's corporate superhero status in Japan makes things particularly tricky for Louis Schweitzer. In 2005, Schweitzer was finally ready to step down as CEO of Renault. In 2005, Schweitzer was finally ready to step down as CEO of Renault. The plan was for Carlos Ghosn to come back from Nissan and be his successor to take over running Renault. Carlos Ghosn has a different memory of that than I have, but I'm quite certain my memory is correct,

is that we had agreed that when he would come back to France, he would relinquish his position at Nissan. Because I felt that two different companies 10,000 kilometers apart, you cannot manage. Schweitzer says if Renault and Nissan had merged, this would be a different story. But they were really two different companies. Ghosn doesn't really want to leave Nissan. And Schweitzer begins to realize that he doesn't have all that much leverage to get Ghosn to come back to little French Renault. I mean, Ghosn was a very big deal in Japan. They were arranging sushi in his likeness. And to hear Schweitzer tell it, Ghosn kind of pulled a fast one. So when the time came for him to become CEO of Renault, he told me, well, the guy I had pinpointed and we had discussed for my successor at Nissan, finally he is not up to standard.

And so I need a few more months to find somebody else. And of course, this never happened. The best candidate is me. Yeah. That, I think, was a mistake. Do you feel any responsibility for that? Well, quite frankly, I have asked myself this question quite often. That is how Carlos Ghosn became CEO of not one, but two car companies,

eight time zones apart, with a total workforce of more than 250,000 people. And with this second job, Carlos Ghosn was now drawing two salaries. But back then, no one knew exactly how much he was making. Here's French journalist Yann Rousseau again, the one who met with Ghosn in prison. Renaud, we know exactly he's going to make two or three million euros a year. Already, it's a scandal for the French. I mean, French are complaining, the workers, the trade unions, the governments, it's too much. But we don't know publicly how much money he makes at Nissan. And there's a reason for this. To understand the Japanese view on executive pay,

we spoke to a few experts. Hitotsubashi University professor Masako Igawa says her country has a history of paying executives far less than those in the U.S. or Europe. Companies have been seen as a community, and CEO is the leader of the community. So it's very important for that leader to have sort of a reasonable relationship with the employees. There was a feeling that the CEO would be motivated by inherent wish to bring prosperity to the company and employees rather than getting a big pay. That tradition, she says, has to do with Japan's system of seniority promotion.

You often join a company out of university and advance through the ranks. When someone gets promoted to an executive role, it's not like they're suddenly that much more valuable than you. Too much pay would create distance between you and the new boss. It has been said about Japan's culture that a nail that sticks out gets hammered down very quickly. This is former Ambassador Sadaki Numata. It all has to do with respect for harmony, our preference for harmony.

If somebody earns too much money, he does stick out. Ghosn was starting to stick out. Louis Schweitzer says even though French norms are similar to Japan's, Ghosn preferred the U.S. system, where the free market and performance incentives determine CEO pay. That Carlos liked money, I knew that. I mean, when I sent him to Nissan, the Japanese thought we had made a mistake in the number of zeros. Okay, that's the American style. I mean, it's not my style, but I accepted this as an element of, I would say, the culture of Carlos Ghosn. Starting in 2010, we get more information on the number of zeros in Ghosn's compensation. A new law in Japan requires disclosure of any salary above 100 million yen.

That's around $1 million. And that year, Nissan reported that Ghosn earned nearly 10 times that threshold, nearly $10 million. Now, that is low for an auto company CEO globally, but extremely high for Japan. The CEO of Toyota, Japan's number one carmaker, didn't even exceed the threshold. He wasn't even earning $1 million. At Nissan shareholder meetings, there were often questions about the high pay. In 2014, Ghosn defended his compensation in a talk with journalists in Tokyo. People look at this and say, yeah, but in Japan, you're the highest seller in Japan.

Yes. So at the same time, Nissan, it cannot be considered only as a Japanese company. Ghosn's point was that Nissan cannot be considered only a Japanese company, that it was a global company now. It's kind of ridiculous to say, we can't pay you what Volkswagen or Ford would pay you. Even so, Ghosn said that he recognized what he called the sensitivity in Japan. Now, this has to be done in a way which is not provocative. It's a kind of fine art. He said it's a kind of fine art to get paid at international CEO market rates in a country where that is not the norm. But what did he mean by fine art

exactly and being paid in a sensitive, non-provocative way? And maybe more crucially, how does an outsider like Ghosn know when he's gone too far, when he's provoked a culture that values harmony and where few want to stick out? Over time, his mentor Louis Schweitzer thought Ghosn was starting to overreach. Like when Ghosn tried to expand the alliance and get a third paycheck. The fact that he wanted to be the chairman and CEO of Renault and Nissan, and at one point of time, between 2005 and 2009, he wanted also to have General Motors joining the group. You know, it showed that he had lost touch with reality. In 2018, executives at Nissan went to the Japanese government and said that Ghosn had

officially gone too far. They alleged that he broke the law, the one that Japan introduced in 2010, that you have to disclose your total pay. They argue that he failed to report $82 million of his retirement package. Nissan executives gave the government, among other things, internal documents where you can see Ghosn's handwriting. He has taken a marker to some of the numbers, crossed them out, and written in higher ones. Japanese authorities arrest him, and he spends 130 days in prison. You know, that place with a 15-minute bath time limit. When he's released on bail, a judge makes him surrender his three passports and $14 million.

Then he spent months at his Tokyo home awaiting trial. He told the media he would vigorously defend himself in court, but meanwhile, he was planning his escape in a box. After the break, Carlos Ghosn makes the case for himself. We're okay to go? Okay, that's fine. Okay, I'm yours then. A few weeks ago, our team at Harvard Business Review interviewed Carlos Ghosn from his home in Beirut. He's been living as a fugitive, a pretty fancy fugitive, for the past year and a half.

We asked him the burning question, what was he thinking while he was inside that box being loaded onto a jet? You know, maybe somebody's going to open the box. Maybe the box is going to go through the x-rays. Anything can happen. So you don't want to be daydreaming about what's going to happen when you arrive to Beirut or, you know, the life you had before you've been arrested. You really want to be concentrated on the present, listening to all the sound, making sure that you're ready to act if a dangerous situation unravels in front of you.

Yeah. What was it like to look out the window and see Lebanon? Oh, arriving in Beirut with a very nice weather, deserted airport. And the guy at customs telling me, hello, Mr. Ghosn, how are you? It has been a while, we didn't see you, was probably the most welcoming words I've ever heard for a very long time. In some ways, though, Carlos Ghosn is still a prisoner. He can't leave Lebanon. There's an international arrest warrant out for him. And he hasn't been on a plane since he fled Japan. His life is very different than it was before he was arrested. Now, he says, he's enjoying the non-prison and non-CEO pleasures of life. I sleep better. I enjoy particularly having breakfast with my wife without being rushed into taking a plane or going to the office. I can take a bath every day without limitation of time and with a big,

thick towel. You know, I can tell you that this is the thing that in prison in Japan shocked me the most. Ghosn is proud of his time at Nissan. And yes, he admits there was a post-retirement pay package for him that he did not disclose. But he argues he didn't have to report that pay because he hadn't been paid it yet. Regardless, Ghosn still sees himself as the company's savior. Well, you know, when I arrived in 1999, I was shocked by how boring Nissan was. The brand was boring.

The products were boring. Nobody was talking about us. The only thing which was original in Nissan is my arrival. There was something strange, exciting happening. And it was around me. You know, after the dullness, the sadness, the grayness of Nissan, all of a sudden things were exciting. So this hype, I wanted to maintain it because this hype, I wanted to transmit it to the

brand, to the cars, to the technology, and it was very successful. This is exactly how I feel about when I joined Planet Money. We asked Ghosn about Schweitzer's accusation that perhaps he'd lost touch with reality. You know, with all

due respect to Schweitzer, I think we're not hired because we are in touch with reality or not touch in reality. We are hired to deliver results. There are a couple of ways to think about this saga of Carlos Ghosn. If you believe the Japanese case against him, Ghosn worked the system, putting his personal fortunes ahead of the company. Ghosn was greedy, and he didn't just break cultural norms, he also broke the law. If you take Ghosn was greedy, and he didn't just break cultural norms, he also broke the law.

If you take Ghosn at his word, he was worth what he was being paid. His salary was in line with car executives around the world. And really, this wasn't about hiding his salary or benefits. He alleges that this was just an underhanded way for Nissan's old guard to get rid of a superstar who was changing too many things too fast. The only way to get rid of Carlos Ghosn is to totally incapacitate him. And totally incapacitate him was the justice system. Carlos Ghosn was facing up to 15 years in prison. He avoided the trial by jumping bail and fleeing Japan.

Now, without a fair trial, we may never know whether Carlos Ghosn is truly guilty of these charges or not. Meanwhile, he's facing a bunch of lawsuits, including one in the Netherlands that ordered him to give back $6 million. French authorities have also started looking into Carlos Ghosn's finances. They've seized some of his assets and are looking into his tax filings, the financing of lavish parties, millions spent on private planes, and possible kickbacks to car dealerships in the Middle East. Ghosn continues to deny any wrongdoing.

There is way more to this story. Race car driving executives, a boardroom coup, a spy scandal. So go listen to the four-part podcast series. It's called The Rise and Fall of Carlos Ghosn, and it's from the Harvard Business Review show, HBR IdeaCast. Our series is based on reporting by Hans Greimel and William Spisato. Their new book is Collision Course, Carlos Ghosn and the Culture Wars that Upended an Otto Empire.

It's out this week. Today's show was produced by Alexi Horowitz-Ghazi and mastered by Gilly Moon. Planet Money's supervising producer is Alex Goldmark. And this episode was edited by Bryant Erstadt. Special thanks to Anne Sani, Scott Baronato, Maureen Hoke, and Adi Ignatius. I'm Amanda Aronchik. And I'm Kurt Nikif. This is NPR. Thanks for listening.

And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.