Nissan Motor Co.'s Special Committee for Improving Governance plans to suggest that the company drastically increase its number of outside directors, according to sources.
The committee -- which was established in response to the arrest and indictment of former Nissan Chairman Carlos Ghosn -- has deemed that a concentration of power in the hands of Ghosn allowed him to act improperly, and is trying to adopt an outside perspective on the company's management and rebuild its corporate governance, the sources said.
"We aim to create a governing structure ranked among Japan's top three for transparency, in order to dispel the image of misconduct," a committee member said.
The committee will compile a proposal including reform measures by March 27 at the earliest.
Interviews with Nissan President Hiroto Saikawa among other executives have led the committee to conclude that there was a problem with Nissan's corporate governance structure that allowed Ghosn, who also led the alliance of Nissan, Renault SA and Mitsubishi Motors Corp., to act arbitrarily. To improve the situation, the committee plans to reorganize the auto company into a firm with a governance structure of nominating committees, in which outside directors would take the lead in overseeing Nissan's management.
For such a reorganization, the committee plans to increase the number of outside directors from the current three to six or more, accounting for over half of the nine directors in total.
The governance committee is also considering appointing an outside director as chairman of Nissan's board. Under its standing rules, the company's chairman also chairs the board. However, Nissan has learned its lesson from having former Chairman Ghosn serve as board chair, which resulted in a concentration of power.
Renault is said to be eager to appoint its chairman, Jean-Dominique Senard, as Nissan's chairman and may therefore be reluctant to appoint an outside director as board chair, fearing that this move would curtail Senard's powers should he become Nissan chairman. Nissan wants to use the governance committee's proposal as a shield to fend off Renault's demand.
Leaders of the Nissan, Renault and Mitsubishi alliance held talks Thursday. The meeting was mainly about practical tasks and there seems to have been little discussion about Nissan's personnel issues, such as finding a successor to its chairman. A tug of war between Nissan and Renault is expected to continue even after the committee submits its proposal.
In Japan, companies embroiled in fraud and misconduct tend to reorganize their corporate structures to include nomination committees and other such bodies.
In 2014, Mizuho Financial Group, Inc. established a nomination committee and others in response to its negligence over ending transactions with organized crime groups.
Mitsubishi, meanwhile, plans to reorganize itself into a company with committees sometime after next year.
These circumstances point to a lack of competent personnel with adequate management and supervision skills, despite a growing demand for outside directors.
Shinji Hatta, an honorary professor at Aoyama Gakuin University who specializes in corporate audit system, said: "Outside directors are given fewer chances to oversee their company than in-house directors, so it is feared that intense scrutiny would become unavailable. There are not so many suitable people in Japan, which has a short history of companies with a nominating committee governance structure."
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