This is the third article in our monthly series “Racism in Corporate Japan,” funded through the generosity of our SNA Patrons.

SNA (Tokyo) — The world of business has become globalized at senior levels, but the one advanced nation that still treats its corporate leaders very differently based upon foreign nationality alone is Japan. Indeed, in two high-profile cases within the past decade—Michael Woodford of Olympus Corporation and Carlos Ghosn at Nissan Motor Company—elements of Japan Inc. utilized unprecedented tactics to overthrow foreign-nationality business leaders.

There are many ways that the story of foreign business executives in Japan might be told, but here we will revisit the Woodford case of 2011-2012 in light of, and in comparison to, the Ghosn case of 2018-2019.

A perfectly admissible intellectual case could be made that what follows are not examples of “racism in corporate Japan,” but rather stark differences between Japanese and international business cultures. However, since the contemporary Japanese national identity itself conflates “race” with cultural practices and characteristics to such an extreme degree, this may be a distinction without any practical difference.

The Woodford case was well documented at the time by the international media, but the main source we will lean upon is Woodford’s 2012 book, Exposure: From President to Whistleblower at Olympus.

At first glance, the differences between what happened to Woodford in 2011 and what happened to Ghosn in 2018 may seem more salient than any commonalities.

Woodford, for example, never really gained command of Olympus. Soon after his promotion to the office of president, he discovered that real authority remained in the hands of Chairman Tsuyoshi Kikukawa.

Woodford himself was keenly aware of this fact from the beginning of his tenure as the firm’s ostensible leader. He writes, “In most companies, the president has a principal influence over events, but at Olympus my authority as the new incumbent had already proved diluted, much to my frustration… Perhaps I was always seen as a gaijin, an outsider without Japanese attributes, and the kind of president from whom secrets were kept.”

Unlike most other non-Japanese who came to lead major Japanese firms, Woodford had worked himself up the chain internally, having thirty years of experience at Olympus before his ascension to what was supposedly the highest office. And yet, even after three decades of loyal and effective service, he knew that he was still an outsider “from whom secrets were kept.”

On the other hand, the uniqueness of the Ghosn case was that he came to helm Nissan through its alliance with the French automaker Renault. Nissan was, at the time, a deeply troubled company, and with Renault’s much-needed backing, Ghosn was able to consolidate his power in the 1999-2001 period.

For nearly two decades, Ghosn appeared to be firmly in charge of Nissan. There was no Kikukawa-like figure in the background who kept his fingers on the strings. And yet, in the end, it turned out that even Ghosn would prove to be a non-Japanese business executive from whom secrets were kept.

Woodford describes how the Japanese board members of Olympus, many of whom he had thought he had gained a strong rapport with, quickly turned against him as soon as he started asking questions about how Kikukawa had handled certain suspicious financial transactions.

By late 2011, Woodford was officially both president and CEO of Olympus, but he came to understand that these titles were “pure window-dressing.” Kikukawa had united the Japanese board members against him. Woodford felt his spirits plummet when he realized that “all the other directors would stick tightly together, acting as one entity and I was now more of an outsider than ever.” Moreover, “I now knew that the real decisions had been taking place in forums to which I hadn’t been invited.”

This part of Woodford’s account would probably ring familiar to Ghosn as well. In 2018, it emerged that members of the Nissan board had set up their own discrete “forums” to which Ghosn and his top aide Greg Kelly had not been invited, and at which their fate was secretly decided. They were neither given an opportunity to defend their actions, nor did they even know what was occurring.

These board members went so far as to coordinate with Japanese prosectors an ambush for Ghosn and Kelly, so that they could be taken by complete surprise and arrested at the airport as they returned to Japan. Ghosn has alleged that Japanese government officials in the Ministry of Economy, Trade and Industry also had a part in the plot against him.

Many people believe that Ghosn may have indeed been guilty of some sort of wrongdoing, perhaps being too greedy about his executive compensation package or his use of company assets for his own personal enrichment or enjoyment. Woodford, on the other hand, is almost universally regarded as being squeaky clean in terms of his personal behavior.

Largely forgotten, however, is that during his brief battle with the Olympus board in 2011-2012, Woodford too was subject to very similar efforts at character assassination to those that would be launched with much greater effect against Ghosn seven years later.

Immediately upon his highly irregular dismissal as president and CEO, and in an attempt to divert attention from their own financial malfeasance, the Olympus board initiated an attack on Woodford’s reputation, attempting to leverage a heavy dose of anti-foreign sentiment.

Kikukawa immediately declared to the Japanese media, “Mr. Woodford was selected to lead our effort to strengthen Olympus’ international competitiveness. However, he couldn’t understand Japanese-style management and was acting arbitrarily and peremptorily.”

Kikukawa soon wrote a memo to all Olympus employees in a further effort to discredit Woodford, including a passage asserting that Woodford “did not like Japan,” and that, “at a time when he was imposing strict cost cuts on frontline employees, director [Woodford] travelled around Europe and to his home by private jet.”

In other words, although it largely failed to take, Woodford too was subjected to the same accusation that he was illegitimately making use of company assets for his personal enjoyment.

In his book, Woodford also relates how there was an attempt by the Olympus board to accuse him of insider trading—something which could have put his freedom as well as his reputation on the line had it been believed. He commented, “If my adversaries were willing to play dirty tricks like this, they would do anything to blacken my name and remove me as a threat.”

Finally, Woodford also discovered that the Japanese media was willing to act as an accomplice to efforts at character assassination. He described a November 2011 “exclusive” from Jiji Press splashed with the headline, “Woodford Offered to Keep Quiet on Olympus Scandal,” with the text explaining that he had been willing to join in the conspiracy until “he grew dissatisfied [because] he was unable to take full control of the company.”

Woodford’s acid observation was that, “Jiji had not even asked me about the allegations before publishing. So that was how it worked in Japan, one-sided stories based on ‘sources close to.’”

Eventually, Woodford gave up his effort to return to lead Olympus, but only after realizing, “I was not just fighting with the board of Olympus,” but rather, he was fighting “the whole Japanese system.”

Woodford may have ended his corporate battle depressed and drained of money and energy, but outside of Japan he was regarded as a heroic figure deserving of great honor for his integrity and willingness to struggle for what was right.

In hindsight, however, it can be seen that Woodford was lucky to escape.

When the various accusations of his alleged misuse of company assets, insider trading, and participation in conspiracies were thrown at him, Woodford was in a position to immediately hit back, going to the media and to the government authorities with his side of the story. He was able to shoot down the various attacks before they had the chance to gain much traction.

Ghosn, on the other hand, never had a shred of a chance to defend his reputation or to control the narrative. He was arrested, detained, and silenced before he had even realized what was happening, or what he was being accused of having done.

Thereafter, for weeks and months, Ghosn’s attackers within Nissan and at the prosecutor’s office had the entire field to themselves, planting story after story about Ghosn’s allegedly greedy, abusive, and illegal behavior. Ghosn’s reputation was pounded, day after day, by precisely the kind of ‘sources close to’ Japanese journalism that had so angered Woodford.

Indeed, when Ghosn was finally released from detention in 2019 and scheduled his first press conference, he was arrested again and prevented from getting his message out. In any case, his legal jeopardy put limits on what he could prudently say.

It wouldn’t be until early 2020—after he had jumped bail and thus was undoubtedly guilty of something—that he finally was able to go before the world’s cameras and make his case.

But by this time he was tainted by his escape from Japan and the damage to his reputation had already been done. People inside and outside Japan had long since become accustomed to viewing Ghosn as some sort of a criminal or villain. Everything he had to say in his own defense was now treated with deep skepticism, and both the Japanese and international establishment had turned against him.

Woodford had long ago discovered that even the most saintly behavior would ultimately be little defense under such circumstances, noting, “It was nothing to do with what was right or wrong, but simply the unwritten rules of the ‘club’” that would prevail.

Woodford’s depressing conclusion was that “unquestioning tribal loyalty was crippling Japan’s future.”

Likewise, the manner in which Ghosn went from hero to zero in about two seconds flat, the outrageous way he was treated by the legal system, and the vindictiveness with which he and his family have been pursued, reveal the very same “bullying mob mentality” that Woodford had once suffered at the hands of his Japanese colleagues in the Olympus boardroom.

It should be noted, however, that some observers believe that there is a growing recognition within the Japanese business community that things need to change, and that cautious efforts at reform are advancing.

Jonathan Soble, the then-Financial Times reporter to whom Woodford turned when he decided to go public with his story, explained to the Shingetsu News Agency that “foreign bosses have often been brought in for very specific purposes—cutting costs, breaking through factional deadlock. When there’s a problem which, for whatever reason, the existing traditional Japanese-style management structure can’t solve, then you’ve seen in many cases the, ‘Well, let’s just bring an outsider in to shake things up.’”

He quickly adds, “Shaking things up is always a risky proposition.”

Although Soble didn’t say it, this also means that these foreigner bosses are disposable once their immediate function of shaking things up has been completed.

In this way, the talented foreign business executives Michael Woodford and Carlos Ghosn both discovered to their detriment that although they had once performed useful roles and had gained offices at the very top of Japanese corporations, it still meant very little: They could never be members of the tribe.

Racism in Corporate Japan Series

Article 1: Pachinko Mogul Accused of Racism by Own Daughter

Article 2: Anti-Korean Racism Blemishes Beauty Brand DHC

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