Reviewing the compensation system in order to restore trust and improve business performance
Restructuring governance has been a pressing task at Nissan since 2018, when a serious case of misconduct was discovered. In December of that year, the Special Committee for Improving Governance was established, and considerable time was spent researching examples of world class governance systems and reviewing the governance at Nissan. As a result of this thorough process of investigation and assessment, a swift transition was made to three statutory committees, as this was necessary for Nissan to make a fresh start.
An important role for independent outside directors is to ensure transparency of company management and enhance corporate value. In particular, high transparency regarding executive compensation is required in order to restore the trust of stakeholders. Therefore, we reviewed all policies, principles and systems related to executive compensation.
In order to develop a compensation system that is clear to stakeholders, we have to determine compensation in a manner that is transparent and consistent, and also fair by eliminating discrepancies between regions. At the same time, it is necessary to contribute to improving corporate value by creating a system that will increase the motivation of the company’s management.
Deliberations on compensation levels were made in accordance with results of a study conducted by a third-party specialist, which was based on select benchmark companies. The decision was made to abolish the problematic share appreciation rights (SARs) system, and discussions were held regarding a new system of incentive-based compensation. We considered the urgent task of reviving Nissan’s business performance, as we designed the balance between cash and stock-based payments as a long-term incentive to enhance performance motivation, while serving as a healthy incentive system for management.
The new stock-based compensation system was introduced to eligible executives, shareholders and other stakeholders through timely disclosure.
Captivating products are the key to restoring trust
The best way to restore trust is to provide customers with attractive cars and other products that enrich their lives and provide satisfaction. If we produce such wonderful vehicles, Nissan’s fans will increase, which will lead to an improvement in brand value.
Through the transformation plan “Nissan NEXT,” we will streamline our vehicle lineup to focus on the most attractive vehicles. We created a plan to introduce 12 vehicle models over the next year and a half, including the Nissan Ariya. As a member of the auto industry, it is exciting to promptly provide our customers with Nissan’s exceptional cutting-edge technologies.
In my case, I drive a Nissan LEAF equipped with a 62 kWh battery, and I can attest that once you drive an electric vehicle (EV), you will never want to drive anything else. The same is true with e-POWER, which is the type of cutting-edge technology that just feels right. In revising our midterm plan, we considered the strengths that can serve as the nucleus of Nissan. It became clear that the core competence of Nissan is the creation of exciting cars and the pioneering spirit of seeking to create what other companies are unable to make.
The innovation that underpins those strengths cannot be created overnight. The efforts of employees globally in developing achievements in various technical fields resulted in Nissan’s strengths and appeal. Given the assets accumulated, we were able to narrow down investments in 2020 to future areas of focus in order to establish the foundation for turning around the company’s situation. As an independent outside director, I will carefully check the progress of the management strategy in the future.
In December 2019, a new executive management system was launched. We visited many gemba to hear directly from employees and received considerable feedback regarding expectations for executive management. My impression is that this is increasing motivation throughout the company.
Two expectations of executive management are “effectiveness and speed.” Given the auto industry is undergoing major changes, a key factor is to speedily make management decisions and effectively implement them. Although significant improvements have been made compared to the past, Nissan has further undeveloped strengths. Making these possibilities a reality is a future task. Expressed differently, Nissan has finally entered that phase. We spent substantial time to restore the health of our governance system and now that the foundation is in place, we have started toward improving the business performance.
Also aiming to maximize Nissan’s strengths through long-term strategy
One area of focus for me is mobility services. As a leader in EVs and driver-assist technologies, Nissan is contributing to environmental, social and governance (ESG＊) factors through our products, such as the realization of smart grids, while at the same time undertaking the challenge of creating mobility services to address social problems. If Nissan commercializes many services through electrification and intelligent functions of vehicles, it is possible to create corporate value beyond the framework of an automaker.
I also participate as an observer at the Alliance Operating Board. It carries out lively discussions about medium to long-term plans, and there are technologies and services that can be made possible through strategic investments. The Alliance is a strength of Nissan as it serves to improve operational efficiency and create value
Information is the key when it comes to mobility services, so it is important to obtain and analyze information in each region, starting with the area of customer needs. The Alliance is in a favorable position to do so, given its strong network, with Renault in Europe and Africa, Nissan in the Americas, Japan and China, and Mitsubishi Motors in Southeast Asia.
Attention is focused on an investment approach that considers ESG factors, and one of the strengths of Nissan is that through its products and services, it is reducing the burden on the environment and vitalizing communities, primarily through EVs, driver-assist technologies, and connected technologies.
One example is in the field of disaster response. Nissan entered into disaster-cooperation agreements with local governments, companies and regional Nissan dealers for the use of EVs during times of disaster. Throughout Japan, this initiative has been expanding since 2018.
Amidst the COVID-19 pandemic, Nissan has also speedily provided face shields and medical gowns. I think that coordinating business and social contribution activities will help create sustainable business operations and improve corporate value by contributing to society through our products and services.
As a global corporate citizen, we will strive to provide automobiles and services that will enrich people’s lives in all eras.
- Environment, Social, Governance
Published in January 2021