How damaging is the Ghosn scandal for Brand Japan?

When former Nissan Motor chairman Carlos Ghosn was arrested in November for alleged misconduct, observers in the communications field did not anticipate much impact on the carmaker’s brand, much less Japan’s national one.

Four months on, with Ghosn still languishing in jail and legal proceedings not expected to begin until the summer, the issue looks more complex. Nissan’s share price has not recovered as people had expected it would, and Ghosn's alleged malfeasance has highlighted an apparent lack of corporate governance in Japan, which does not look set to change any time soon.

In addition, Ghosn’s new lawyer, Junichiro Hironaka, has suggested that his client’s treatment by the authorities stands to damage Japan’s international reputation as a place to do business. The argument is that it appears too easy to unwittingly fall afoul of the authorities and land in prison with little chance of a fair hearing.

Some international media and observers have presented Ghosn’s denial of bail as heavy-handed, arbitrary and unfair, and characterised Nissan’s actions as a coup designed to clear the way for new leadership and a new direction.

Campaign asked the Japan External Trade Organization (JETRO) whether it saw this state of affairs as damaging to the country’s image, but a spokesperson declined to comment.

“For better or worse, this whole incident has shone a very harsh light on the criminal judicial system and laid bare the rather unusual characteristics of the way those suspected of criminal activities are held,” said Yuuichiro Nakajima, managing director of Crimson Phoenix, an M&A advisory firm in London.

Nakajima said he had described the situation as appearing “outdated and even outrageous” to a Japanese government official in London, who had no comeback. He said the perception that Ghosn may “deserve to be treated harshly” because of his earnings and status is unfavourable for Japan's image.

“I’m not sure if it’s critically damaging," he said, noting that a seperate deal he was working on between French and Japanese entities did not suggest increased concern around the way things are done in Japan, but added: "I think it’s dangerous to say there’ll be no impact on Japanese business deals.”

Others are dismissive of Hironaka’s attempt to cast Ghosn as a victim, but still see some potential fallout from the way things have been handled.

“To make this a political case against Japan’s brand in the media as a strategy is unlikely to move Japan’s prosecutors,” said Steven Bleistein, chief executive of Relansa, a management consultancy in Tokyo, adding that he imagined them to be “very confident in the evidence that they have”.

Corporate Japan is sometimes seen as inclined to punish those who go too far in challenging the established order. But Bleistein said it was “disingenuous to portray Ghosn as a victim of retribution for being an outsider who attempted too much change in Japan”.

But he agreed that the increased attention on Japan’s judicial standards could be problematic for the country. “It is watching Ghosn be subjected to an onerous legal system where the rights of the accused and the burdens of evidence are shockingly thin by the standards of most of the world’s democracies that could damage Japan’s brand as a place of international business, but not by much in my opinion. China’s brand does not appear to have suffered much for its legal system.”

What about Nissan? Nakajima said he doubted if decision makers outside Japan would see the case as representative of Japan as a whole. "Well-informed and insightful foreign managers would see past the peculiarities of the Nissan case, which is quite an unusual one by any standard," he said. But he criticised the company’s communications around the issue as “muddled” and said they had “allowed the conspiracy theory to fester”. 

“From an audience point of view, it was a great missed opportunity for them,” he noted. “It hasn’t done anything good for the share price, it’s created a huge cloud of uncertainty over Renault and Mitsubishi, and most investors don’t know how to value the company. They don’t know where the alliance is going. If I were an investor, I certainly wouldn’t invest in the company now, and if I had shares in it I’d be very frustrated due to the lack of clarity.”

While the impact of the scandal may yet deepen, Edelman's latest Trust Barometer study finds faith in corporate Japan up. Trust in companies based in Japan rose 9% in the last year.