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Nissan-Renault alliance

Isolation and distrust brought down Nissan CEO Saikawa

Fellow executives resented being left out of loop in favor of outsiders

Nissan Motor CEO Hiroto Saikawa announced his resignation on Sept. 9 under heavy pressure from the automaker's board.   © AP

TOKYO -- Nissan Motor CEO Hiroto Saikawa's upcoming resignation on Monday may have been triggered by allegations that he inflated his compensation, but the root of the problem lies in his failure to earn the trust of fellow executives.

Nissan management was rattled by a Wall Street Journal article in early August that reported on email negotiations between Nissan and French partner Renault on the alliance's capital structure. Nissan's side called for Renault to reduce its stake in the Japanese automaker to between 5% and 10% from the current 43%, while also proposing a joint venture to show that "the alliance is not dead."

The shock lay not only in the content of the emails, but also in seeing outside director Masakazu Toyoda listed alongside Saikawa as part of Nissan's negotiating team.

Saikawa kept in frequent contact with Renault Chairman Jean-Dominique Senard by phone and email. These were frequently one-on-one conversations, with other senior executives left out of the loop.

Toyoda, a former bureaucrat in the Ministry of Economy, Trade and Industry, was known to be among the few people who had Saikawa's full confidence, but this particular demonstration of that fact came as an unpleasant surprise.

"President Saikawa is putting an outside director in a more important position than us?" one executive fumed.

"We decided to do things through collective decision-making, yet no information at all has come to us," another complained. "It's backroom politics."

When former Nissan chief Carlos Ghosn was ousted last November over allegations of financial misconduct, Saikawa took the reins. It was understood that a small circle of top executives would share important information and work together to hash out a strategy.

Yet Saikawa "ended up keeping things related to Renault -- the most important issue -- to himself," a senior Nissan official said.

Why did the CEO's approach change at a time when unity within management was vital?

Multiple Nissan insiders cited a governance reform proposal early this year as the turning point. After Ghosn's ouster, Nissan set up a panel of outside experts to revamp the automaker's governance structure to prevent such problems from happening again.

The committee compiled its findings and recommendations into a report in March that condemned Ghosn's actions but was silent on whether Saikawa should take any blame for failing to spot the problems, both as CEO and as a close associate of the former chairman.

"It might be that his confidence grew after the recommendations didn't include anything about his responsibility and he weathered the general shareholders meeting," an executive said. "After that, he moved things forward on his own authority, with the backing of some outside directors."

It is true that steering a company during a crisis can require individual leaders to make quick decisions. But Saikawa's stinginess with information after the fact, along with a steep earnings downturn, caused discontent with his management style to boil over this summer.

In early August, some external directors, seeing Saikawa's continued leadership as intolerable, began quietly working together on a campaign to force him out within the year.

This month, an internal investigation confirmed accusations voiced in June by former director Greg Kelly -- a close Ghosn aide allegedly involved in the ex-chairman's misconduct -- that Saikawa also inflated his compensation. The CEO's remaining support evaporated after that.

Last Friday, an executive pressed Saikawa to "resign Sept. 9 effective immediately" and "properly take responsibility" for his actions. The CEO expressed a willingness to step down but gave no specific time frame, according to a source familiar with the exchange.

In a board meeting this past Monday, Saikawa was ultimately forced to step down sooner than he had hoped. He returned home early the next morning.

"I gave it my all every day," he said when asked about his feelings on the situation, sounding as if he was trying to convince himself. "I have no regrets."

Nissan is already moving on. Chief Operating Officer Yasuhiro Yamauchi, who will step in as acting CEO when Saikawa leaves Sept. 16, talked to Renault CEO Thierry Bollore on Tuesday, recommending speedy development of autonomous-driving technology.

Ghosn's leadership turned autocratic because of overconfidence in his abilities. Saikawa got the ball rolling on governance reform, but he ultimately followed in his predecessor's footsteps by relying on a trusted inner circle rather than broad consensus. The next CEO -- whom Nissan aims to appoint by the end of October -- will need to forge a new leadership model.

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