Nissan post-Ghosn governance steps, board win shareholders’ approval

Nissan Chief Executive Hiroto Saikawa has apologized “for how the misconduct has caused serious concern for our shareholders,” involving a high-profile scandal of its former chairman Carlos Ghosn. (Reuters)
Updated 25 June 2019

Nissan post-Ghosn governance steps, board win shareholders’ approval

  • The Japanese automaker had seen profits and dividends tumble amid a high-profile scandal involving its former chairman Carlos Ghosn
  • Some shareholders expressed worries about the future of the automaker

YOKOHAMA, Japan: Scandal-battered Nissan won shareholders’ approval Tuesday for a new system of committees to oversee governance and for keeping Chief Executive Hiroto Saikawa on its board.
The Japanese automaker had seen profits and dividends tumble amid a high-profile scandal involving its former chairman Carlos Ghosn. Some shareholders expressed worries about the future of the automaker.
Saikawa and the other board members, including French alliance partner Renault Chairman Jean-Dominique Senard, bowed deeply at the meeting at a convention center in the port city of Yokohama, where Nissan Motor Corp. is based.
“I’d like to offer my deepest apologies, representing the company, for how the misconduct has caused serious concern for our shareholders,” Saikawa said.
Ghosn, who led Nissan for two decades, was arrested in November and is awaiting trial in Japan on charges of financial misconduct, including falsifying documents related to retirement compensation. He says he is innocent.
The proposals to have committees overseeing compensation, board nominations and auditing required a majority of shareholders for a quorum and two-thirds of those voting for passage.
Approval was shown by clapping among the more than 2,800 people present at the meeting. Most of the votes were submitted in advance.
French automaker Renault, which owns 43 percent of Nissan, had earlier signaled it may abstain, saying it wanted more representation on the committees.
To satisfy that request, the committees have Senard, who replaced Ghosn on the Nissan board, and Renault Chief Executive Thierry Bollore.
Saikawa told shareholders he had “two kinds of responsibility,” for what had happened in the past as well as building toward a future and a recovery, including nurturing his successor.
“I would like to work toward putting Nissan on a stable track,” he said, asking for shareholders’ approval for his remaining as Nissan’s leader. “I want to speed up the preparations for a succession.”
Although Nissan has been trying to put the scandal behind it, many have been wondering why the alleged wrongdoing, if true, had gone unchecked, especially how much Saikawa knew. One shareholder asked whether Nissan officials besides Ghosn shared in the alleged misconduct.
For the fiscal year that ended in March, Nissan’s profit plunged to about half of what it was the previous year, partly because of the scandal, as well as problems in the lucrative North American market. The maker of the Leaf electric car and Infiniti luxury models is projecting a further deterioration in its earnings, but promising a recovery for the year after that.
It logged $83 million (¥9.2 billion) in costs for the fiscal year that ended in March from alleged underreporting of Ghosn’s compensation.
The proposal, which won shareholders’ approval, called for an 11-member board, including seven outside directors such as Andrew House, formerly with Japanese electronics and entertainment company Sony Corp.
For the appointment of directors, a third of the shareholders made for a quorum, and passage needed a simple majority of those voting.
Some analysts suggest a deepening rift between Renault and Nissan after a planned merger between Renault and Fiat Chrysler fell through earlier this month. Nissan expressed reservations about immediately joining the merger.
Some shareholders expressed worries about the alliance, and one who stood up to ask a question said the main person who had made decisions, referring to Ghosn, was now gone.
Nissan held an extraordinary shareholders’ meeting in April to oust Ghosn. Last week, Mitsubishi Motors Corp., a smaller Japanese automaker in which Nissan owns a 34 percent stake, won shareholders’ approval to oust Ghosn.


Negative rates forever? Central bankers look for an exit

Updated 21 October 2019

Negative rates forever? Central bankers look for an exit

  • Negative interest rates are now a fact of life in Europe and Japan, and multiple other countries including the US are lowering their target policy rates
  • Negative interest rates may be hiding “deep underlying problems,” a “sign of sickness for developed economies,” says Iceland's Central Bank chief

WASHINGTON: The world’s most powerful policymakers are struggling to alleviate the pain of a slowing global economy with few levers left to pull and growing concern that one of them, negative interest rates, already is creating problems of its own.

In an ideal world, elected officials would pull more of the weight with fiscal programs and structural reforms that would improve growth and allow interest rates to rise.

But over three days of conversation here, the dilemma has become clear: Whether it is the US-China trade war, tightfisted spending in Germany, or the drawn-out Brexit, broader government policies are moving in the other direction — driving central bankers to mount further rescue efforts, and likely leading to even more negative yielding debt.

“We still have tools which could be used as necessary,” said Bank of Japan Governor Haruhiko Kuroda. “I don’t think the effect of monetary policy has declined significantly or materially.” Still, Kuroda said that a prolonged low interest rate situation could have “side effects on the financial system. You have to be careful.”

Negative interest rates are now a fact of life in Europe and Japan, and multiple other countries including the US are lowering their target policy rates.

“It is not really clear how we are going to get out of this,” Stanford University economics professor John Taylor said at a meeting of the Institute of International Finance.

He spoke at a central banking panel that showed just how much the landscape has shifted in the decade since the 2007 to 2009 financial crisis. Far from debate over whether unconventional policies are appropriate or not, the discussion is now about whether traditional central banking can even survive — or whether oddities like negative rates have become self-reinforcing, and whether central banks will need to begin overtly financing government programs to get the fiscal spending that may provide an exit from them.

“We have got to make it easier for politicians to run fiscal policy when monetary policy is essentially not operating well,” said former Federal Reserve vice chair Stanley Fischer, now a senior adviser with investment management firm BlackRock.

Conversation at the International Monetary Fund and World Bank meetings this week was dominated by two concerns — a global economic slowdown driven by “policy shocks” that might have been avoided, and the risks to pension funds, banks, and overall financial stability posed by the roughly $15 trillion, estimated by the IMF, in bonds that now pay a negative interest rate.

With easier monetary policy being used to dampen the impact of the trade war and other risks, some analysts worry about the moral hazard of central bankers underwriting the very policies they feel are slowing growth.

“There is a kind of benign view that central banks are just kind of doing their best to offset the damage done by one set of policymakers in one side of the government,” said Brian Coulton, chief economist at Fitch Ratings. “There is a real danger in misplaced faith in the capacity of central banks to fix all these growth challenges.”

Yet they may have no choice. IMF economists slashed their forecasts for global growth to the slowest pace since the 2008-2009 financial crisis, ahead of the conference, setting the tone for a somber mood.

In a communique issued on Saturday, the IMF’s steering committee said member countries should “employ all appropriate policy tools, individually and collectively, to mitigate risks.”

With interest rates close to or below zero, asset purchases are now the main policy tool for some central banks. The ECB, for example, has cut its key rate to a record low of minus 0.5 percent and launched an indefinite bond buying program that will likely keep it in the market for years to come.

“The risks surrounding the euro area growth outlook remain tilted to the downside,” outgoing ECB President Mario Draghi said at the IMF meeting on Friday. “The Governing Council continues to stand ready to adjust all of its instruments.”

Beyond the euro zone, the US and Japan, other nations are also easing rates. The Russian central bank, which has been cutting rates this year as economic growth slowed and inflation waned, will be ready to act “more decisively” when cutting interest rates, Governor Elvira Nabiullina said.

Ukraine central bank Deputy Governor Kateryna Rozhkova said the bank intends to cut the key policy rate gradually.

While lower rates support growth, the consequence of ultra-accomodative policy is that it can breed higher risk taking, as investors search for yield, said experts.

“We do worry about the side effect, which is that investors are reaching for yield,” said Tobias Adrian, financial counselor and director of the IMF’s monetary and capital markets department. “That is ultimately what is driving high yield bonds into negative territory in some parts of the world.”

Adrian pointed to leverage rising in the corporate sector and said the IMF saw stretched valuations in some equity markets, many corporate bond markets, and government bond markets around the world.

Negative interest rates may be hiding “deep underlying problems,” said Ásgeir Jónsson, governor of the Central Bank of Iceland. They’re a “sign of sickness for developed economies.”