Thursday10 October 2019 ★ FINANCIAL TIMES 13
COMPANIES
K A N A I N AGA K I A N D L E O L E W I S— TOKYO
Acting with unexpected speed, the
board ofNissan ade a grand show ofm
cleaninghouseonTuesday.
Makoto Uchida nda Ashwani Gupta
were installed as chief executive and
chief operating officer respectively, in a
purge that saw more experienced
names dropped as the Japanese car-
maker tries to put the torrid year
sinceCarlosGhosn’sarrestbehindit.
The overhaul was capped by a
reduced role forHari Nada, the com-
pany’s pre-eminent legal brain and the
main whistleblower who triggered Mr
Ghosn’s downfall. But for investors and
its140,000employees,thecriticalques-
tion remains: does this decisively put
Nissan’sdarkesthoursbehindit?
Former and current executives fear it
may not. The revamp looks incomplete,
those people say, as long as one of Nis-
san’s most influential figures —Hitoshi
Kawaguchi retainshisgriponpower.—
Until now, Nissan’s 66-year-old head
of government affairs, communications
and the corporate management office,
has kept a low profile as a behind the
scenes facilitator. Under Mr Ghosn, Mr
Kawaguchi was a crucial and trusted
lieutenant; since the former chairman’s
departure, say people who have worked
with him, he has amplified some of the
splitswithinmanagement.
Mr Kawaguchi wasyesterday given
additional roles at Nissan, including
running its legal department. But peo-
ple familiar with Nissan’sinvestigation
in to Mr Ghosn’s financial dealings say
he has a possible Achilles heel. One of
theallegationsforwhichMrGhosnfaces
criminal trial — and will deny in court —
is that he contrived to understate his
pay in company documents after Japa-
nese rules changed in 2010 to require
morestringentdisclosure.
One of the schemes that made this
possible, according to an investigation
commissioned by Nissan and carried
out by the law firm Latham & Watkins,
was by extending the vesting period for
tens of millions of dollars worth of stock
appreciation rights (SARs) from one to
five years. Depending on when the
period was extended to, Mr Ghosn
might have retired as a director of Nis-
san after the rights were exercised, and
would therefore not be subject to the
disclosure rules. There is no suggestion
in the report that the scheme was either
unlawfulorunethical.
The scheme’s architect, said people
with direct knowledge, was Mr Kaw-
aguchi. And he was proud that he had
found a solution to his boss’s request.
According to people familiar with its
contents, Mr Kawaguchi sent an email
toMrGhosninAugust2013,inwhichhe
declared that he had a “potentially bril-
liantidea”:theextendedSARsscheme.
Within a tight group of Nissan execu-
tives, it was no secret that Mr
Kawaguchi was behind the scheme. “It
was known internally as the Kawaguchi
method,” said one person with knowl-
edgeofthediscussionsatthetime.
MrKawaguchitoldtheFThehadpro-
posed to Mr Ghosn and other Nissan
executives a delay in exercising the
SARs until March 2017, the final year of
Nissan’s midterm plan.He deniedthe
recommendation was made to avoid
disclosureoftheirpay.
Although he advised Mr Ghosn in
2013, Mr Kawaguchi was not among the
six executives who were named in the
report for being overpaid using the
same SAR incentive scheme that paid
out cash depending on Nissan’s share
priceperformance.
The internal probe had also found
thatHiroto Saikawa, Mr Ghosn’s hand-
picked CEO who wasforced to resign in
mid-September, had been improperly
overpaid about $440,000 in 2013 by
extendingtheSARscheme.
Mr Kawaguchi’s role in devising the
SAR scheme, say people close to Nis-
san’s board, shows his skill in remaining
closetowherepowerlay.
The ousting of Mr Ghosn unleashed a
battle for control of Nissan that para-
lysed the company’s recovery efforts
and jeopardised its 20-year alliance
with France’sRenault. The internal fis-
sures come as the global car industry
wrestles with the shift to electric vehi-
clesandslowingsalesinkeymarkets.
At the heart of that environment was
Mr Kawaguchi, said people who have
had a close working relationship with
him. Internal feuding, which has long
been part of Nissan’shistory, scalatede
in recent months after ties soured
betweenMrSaikawaandMrKawaguchi
overwhoshouldleadNissan.
“People inside Nissan are used to
ganging up against the big boss,” said
one official with close ties to thecar-
maker. “So when Ghosn was gone, eve-
ryonejuststartedfightingeachother.”
Mr Saikawa faced increasing pressure
to step down after revelations of his
overpayment, a plunge in profits and a
breakdownoftieswithRenault.Butdis-
content grew internally as he remained
ambivalentonthetimingofhisexit.
In the weeks ahead of his resignation
last month, people close to the former
CEO said Mr Saikawa had pushed for a
younger generation to take over after he
had promoted Mr Uchida and Jun Seki,the former head of its China business, to
jointheexecutivecommitteeinMay.
Shortlyaheadoftheboardmeetingon
September 9, he disclosed his plans to
Mr Kawaguchi andYasuhiro Yamauchi,
theformerchiefoperatingofficer.When
the meeting was convened, Mr
Yamauchi sided withexternal directors
who called for Mr Saikawa’s immediate
resignation. By the end of the day, Mr
YamauchiwasnamedinterimCEO.
Mr Kawaguchi pushed for Mr
Yamauchi to becomepermanent CEO,
but the63-year-old executive was
rejected by several members of the
nomination committee. The new man-
agement team announced this week did
not include Mr Yamauchi. When asked
at a press conference on Tuesdayabout
his absence,Yasushi Kimura, chair of
Nissan’s board, said: “We felt it was
important for Nissan to be reborn. We
wanted someone who could strongly
carrytheimageofanewNissan.”
Mr Kawaguchi told the FT he felt Mr
Saikawa’s resignation was inevitable for
governance-related reasons. He denied
he had promoted Mr Yamauchi as the
next CEO since the decision was the
board’s,ofwhichhewasnotamember.
Following a three-month search from
a list of more than 100 candidates, the
nomination committee focused on
three individuals. Having spent part of
his career at trading houseSojitz eforeb
joining Nissan and because his previous
postings had mostly been overseas, Mr
Uchida was viewed as neutral to the
infighting in Japan. His fluency in Eng-
lish, and his “admiration” for the alli-
ance, which includesMitsubishi, also
helped secure Renault’s backing. Some
people who have worked with himdescribe the 53-year-old head of China
operationsasbluntandlevel-headed.
“Renault may have thought it would
be easier to work with Uchida than
Saikawa, but he may well be far tougher
than Saikawa,” one senior figuresaid.
“He will push for a more equal relation-
ship with Renault or else his own posi-
tionwithinNissanwillbethreatened.”
Joining Mr Uchida as vice-COO is Mr
Seki, who had been considered by ana-
lysts as the top candidate to replace Mr
Saikawa after the 58-year-old was put in
charge of the company’s recovery plan
in May. But his prospects ere dimmedw
by histies to Mr Saikawa, according to
peoplefamiliarwiththediscussions.
Mr Gupta, the 49-year-old former
allianceexecutivewhoischiefoperating
officer atMitsubishi, will be the young-
est COO at Nissan. It was Renault’s
chairmanJean-Dominique Senard how
pushed for Mr Gupta to be part of the
mix, but others inside the board includ-
ing Mr Saikawa saw him as a strong can-
didate for his experience at all three
companiesinthealliance.
“I worked with Mr Uchida and Mr
Seki 10 years ago so I hope to sit down
with them and carefully discuss how we
can work together to create a new Nis-
san,” Mr Gupta told reportersyesterday
influentJapanese.
Still, some analysts said the fact that
Nissan settled with a three-member
leadership reflected the sharp divisions
betweenNissanandRenault.
“This looks like the product of a com-
promise,” Takaki Nakanishi, ananalyst
who runs his own research group.
“These are people with different way of
thinking that will lead the company
together. Opinion will be divided and it
maycreatenewlinesofconflict.”
There were already signs of a new bat-
tle for control. As it became clear that
Mr Uchida was going to be his new boss,
Mr Kawaguchi offered to introduce the
incoming CEO to senior officials inside
the Japanese government, according to
one person familiar with the discus-
sions. Mr Uchida politely declined, say-
inghewouldgiveitsomethought.Nissan grapples with rebuilding reputation
Leadership overhaul sees top Ghosn facilitator retain grip on power while divisions remain with partner Renault
L E O L E W I S A N D K A N A I N AGA K I— TOKYO
Elliott Management as waded intoh
Japan’s most contentious takeover bat-
tle in years, challenging property group
Unizo o explain its opaque decision-t
making and raising the prospect that
the US activist fund could call an
extraordinary shareholder meeting.
Elliott’schallengecameintheformofan
open letter to thedirectors of Unizo, an
obscure Tokyo-based hotel and prop-
erty group in which it is the largest
shareholderwitha13percentstake.
In the letter, Elliott called on Unizo to
explain its logic both for abruptly
retracting its recommendation ofFor-
tress’s $1.3bn bid and for rejecting out-
rightanearliertakeoverbidbyJapanese
travelgroupHIS.
“We are highly concerned about the
lack of disclosure and the risk of con-
flicts of interest that have appeared in
Unizo’s handling to date of the tender
offerbids,”Elliottsaid.
The letter is the latest twist in a saga
that has escalated in recent weeks to
draw in Fortress,Blackstone nd thea
world’s largest hedge funds. It comes
amid speculation among shareholders
that Unizo could come under increas-
inglyintensepressureincomingweeks.
If management does not adequately
respond to Elliott’s letter, possible tac-
tics they could face include an EGM that
would demand the removal of the top
executives, which investors hope would
enableUnizotoacceptthehighestoffer.
In August, Unizo turned toSoftBank-
backed Fortress to defend itself againstan unsolicited bid made by HIS a month
earlier. Elliott and other hedge funds
quickly built up their stakes, sparking a
surge in Unizo’s share price from below
¥1,800 oabove¥4,880.t
The share price rise forced a shift in
strategy for Unizo, which then opened
talks with Blackstone over a bid 25 per
cent higher than the Fortress offer of
¥4,000pershare.Butinsteadofseeking
a higher offer, Unizo turned against For-
tress, and potentially against its own
shareholders, when it outlined a list of
unorthodox conditions that any exist-
ingandfuturebiddermustaccept.
Investor concerns have centredon a
recently formed Unizo employee-con-
trolled entity that would acquire a stake
in the group once Fortress completed its
takeover.Unizodeclinedtocomment.Property
Elliott challenges Unizo in takeover fight
Eugene Hoshiko/AP‘These are people with
different way of thinking
that will lead together.Opinion will be divided’
OCTOBER 10 2019 Section:Companies Time: 9/10/2019- 18:58 User:alistair.fraser Page Name:CONEWS2, Part,Page,Edition:EUR, 13, 1