The surprising ouster of Carlos Ghosn, a legendary automobile mogul known for building the Renault-Nissan-Mitsubishi alliance, has hogged business headlines in the past week, and his fellow executives may want to take note. His dramatic fall from stardom could ripple beyond the car industry.
Despite the fact that Ghosn’s dramatic departure followed whistleblower allegations, his case could well serve as a warning for other foreign executives aiming to dramatically reform a legacy Japanese corporation, including Takeda CEO Christophe Weber.
A Brazilian-born French national, Ghosn joined Nissan as its chief operating officer in 1999 and immediately embarked on a revival plan for the deeply indebted, struggling Japanese automaker. Ghosn’s bold blueprint included slashing 21,000 jobs—about 14% of the firm’s workforce at the time—mostly in Japan, shutting down five Japanese manufacturing plants and reducing the number of suppliers to cut costs.
He also pushed for a stronger presence for Nissan on the global playground, having personally led the Renault-Nissan alliance, which Mitsubishi joined in 2016. And Ghosn reportedly included executives from Western markets in key strategy discussions for the first time.
Ghosn’s turnaround plan was successful. He returned the near-bankrupt Nissan back to profitability in less than three years and elevated the Renault-Nissan-Mitsubishi partnership into a giant that could challenge Toyota, Volkswagen and General Motors.
If you’re familiar with Weber’s recent history, it’s obvious the Takeda CEO and Ghosn have much more in common than their French nationality.
Weber came over to Takeda in 2014 by way of GlaxoSmithKline and would later became the Japanese pharma’s first foreign helmsman. Takeda at the time had reported its lowest profit in 15 years, far from the kind of trouble Ghosn faced when he joined Nissan, but under Weber’s tenure, the drugmaker has already gone through dramatic changes.
The company in 2016 announced a plan to refocus on oncology, gastroenterology and the central nervous system, as well as vaccines. Then, in an unprecedented transformation for pharma R&D, it divested its drug development, marketed product and post-approval R&D needs to a collaboration with PRA Health Sciences. About a third of the company’s R&D employees changed either locations or jobs during the restructuring.
But those were minor changes compared with what’s yet to come—the $62 billion Shire acquisition that will vault Takeda to Big Pharma status.
Ghosn earned himself the nickname “Le Cost Killer” for his dramatic cost-cutting methods. Accolades were accompanied by criticism—and perhaps made him a few enemies within.
Nissan’s 21,000-sized layoff round was nothing short of controversial in Japan, where the traditional business culture values stable long-term relationships. Lifetime employment is expected, and large corporations sometimes prefer to relieve employees of daily duties rather than fire them, so as to avoid any pushback. Such loyalty exists not only between employers and employees, but also between customers and businesses and among business partners along the supply chain as well.
A Western executive without any Japanese upbringing, Ghosn executed what he thought was necessary—the layoffs and cutting ties with existing suppliers—to salvage Nissan as a business rather than clinging to some classical decorum.
The chaos around Ghosn these days, which led to his removal as chairman of Nissan and Mitsubishi and potentially could spawn criminal charges, stemmed from whistleblower allegations that Ghosn conspired with someone else to incorrectly report his compensation for many years. Local media has reported that Ghosn denied allegations against him. Weber doesn’t face such allegations, but his plans have already raised hackles in Japan.
Like Ghosn, Weber is about to go down the cutbacks path at a firm with 237 years of history. The Shire buyout comes with a cost-cutting plan that will slash up to 7% of the combined workforce. What’s more, the deal will tilt Takeda’s income—and inevitably its attention—outside of Japan and further into the foreign markets.
Is that a wise business plan? Of course. Pressured by pricing constraints, Takeda’s Japanese sales have been declining, and a lack of late-stage pipeline assets just screams M&A, analysts figure.
But opposition has already emerged. A group of rebel investors have rallied against the deal, claiming it goes against the company’s philosophy of “Takeda-ism,” which cites happy people as a key driver for growth. The opponents, though few, reportedly boast backing from some members of the founding Takeda family.
Just as the Nissan-Renault partnership was viewed by some as unequal—because the bigger Nissan only holds a 15% non-voting stake in Renault, while Renault controls a far more powerful 43% in Nissan—the Takeda-Shire transaction, in the eyes of opponents, is “markedly unfair.”
The dissidents see “an excessive burden on the Takeda side” for shareholders, because shifting stock prices ate into the value of the equity portion of the deal. Shire’s share price rose by 25% after M&A talk emerged, while Takeda’s fell 19%.
Because the buyout has cleared all antitrust hurdles, and official approvals from shareholders of both companies are also expected on Dec. 5, it will soon rest on Weber to carefully execute the integration. After all, if Ghosn’s lesson teaches us anything, it doesn’t necessarily take the majority of shareholders to bring down a powerful executive.