The case of former Nissan CEO Carlos Ghosn is a timely reminder for multinational corporations to ensure their senior executives are prepared for all scenarios when relocating to Asia. Sandra Lowe reports on what they should consider before sending their executives to the region.

In an increasingly globalized world, multinational corporations must face the reality that not all legal jurisdictions are the same, and across Asia there are many complex types of legislation at play, from shariah law in Malaysia and Saudi Arabia to lèse majesté laws in Thailand, or the rigid social and workplace etiquette in Japan.

The case involving former Nissan chairman and chief executive Carlos Ghosn in Japan is an example of just how a problematic situation can spiral. The 65-year-old Brazilian-born businessman of French and Lebanese nationality was regarded as a titan of the auto industry because of his success at reviving French automaker Renault, and then Japan’s Nissan. Ghosn had been tasked with guiding an alliance between the two companies, which later included another Japanese carmaker, Mitsubishi Motors.

Today, Ghosn faces financial misconduct charges, including under-reporting of his compensation package and aggravated breach of trust over allegedly failing to report around US$82 million in salary and temporarily transferring personal financial losses onto Nissan’s books during the financial crisis.

He was first arrested in November 2018 and held in custody while the courts repeatedly denied him bail. On 6 March 2019, he was granted a US$9 million bail, but the businessman subsequently fled Japan in December and landed in Beirut, Lebanon.

When politics demands, a CEO can become a convenient scapegoat, particularly in countries with a less than sturdy separation of powers. Tit-for-tat arrests are a common strategy in some Asian countries and the hapless executive may have done nothing to warrant arrest and detention.

Whether Ghosn is a conman or a scapegoat, his case provides an opportune time for multinationals to reassess and ensure they have taken the appropriate steps to protect and prepare their executives as much as possible for not only working in Japan, but elsewhere in Asia.

Stephanie Chiu, a senior associate at Freshfields Bruckhaus Deringer, regularly advises employers on compliance with employment issues. She says there are various strategies that MNCs can employ to prepare CEOs and senior executives before they live and work in Asian countries.

“A first point is to select the right people. Some senior executives will be better able to adapt to new working environments and cultures than others,” says Chiu. “One can expect MNCs to have policies in place and they will often try to operate global policies, which apply across jurisdictions, but there will inevitably be some country-specific differences (both from a cultural and practical perspective, and also from the perspective of legal risks and boundaries), so bespoke/one-to-one training is a valuable part of the preparation for a senior individual’s move.”

senior executivesTraining will also need to make behavioural expectations clear, and how senior executives will be held accountable if or when they cross local lines, adds Chiu.

“We have seen senior executives using their ignorance of local customs and lack of bespoke training to the cultural differences between the home and host country as a defence, but ultimately that type of argument is not going to hold much, if any, weight before a court or a regulator if things go awry,” she says.

Emerico De Guzman, managing partner at ACCRA Law in the Philippines, has advised top MNCs in a variety of industries on their employment concerns. He agrees that CEOs should be prepared and informed before they arrive to a new posting in Asia.

“It is advisable to have such briefings for CEOs upon their arrival in the Philippines so that they may be briefed on: the local culture and customs/practices; the local laws on employment and applicable corporate governance rules, apart from immigration and human relations laws and regulations; and some basic criminal laws and procedures in case they happen to be cited for breaches,” De Guzman says.

Where an executive is trained is not as important as the depth of the knowledge being shared. “Training before or immediately after the relocation should form a key part of the company’s strategy, but it’s important that the training is not just a box-ticking exercise,” Chiu says.

“Training should be thoughtful and tailored as far as possible to the role of the senior executive, the company and the jurisdiction that the executive is relocating to. It should reflect, for example, the size and set-up of the local office, the industry the company is in, especially if the industry is heavily regulated, etc.”

Katheryn Gronauer, the founder of executive training company Thrive Tokyo, says executives moving to Japan should have “some survival Japanese skills under their belts, which might look something like a three-month language immersion with weekly sessions, for example.

“Plus, some kind of briefing to help people understand what to expect during the moving process and perhaps the first couple of weeks they will be here, so that they are fully prepared and don’t have any unexpected challenges.

“The most common issues foreigners face when moving to Japan is that they wait until they are settled before taking language lessons, which means they are the most handicapped in the months they first move here, and most people are also surprised by how much paperwork and time is involved with getting set up (i.e., cell phone contracts).”

Chiu adds that, “when we do bespoke training for clients, we often use a combination of case studies and war stories – participants are much more receptive to interactive discussions and we find that it helps in making sure that the key points ‘stick’!

“Companies can also introduce or help executives sign up for industry roundtables and events, where they can meet their counterparts in other companies who may be in similar situations. This can be a great way for senior executives to start building their own support network and to help them transition into their new roles.”

Local customs

Management of the workforce is also a key consideration as senior executives need to understand that hierarchy in a workplace in Asia can affect the smooth operation of a company.

“An important aspect of moving to a new jurisdiction as a senior executive/CEO is understanding how to most effectively manage the workforce,” says Chiu. “Cultural aspects of working life in that country or office will be part of that – e.g., understanding that people may have different approaches to raising any matters of concern, or to challenging the instructions given by their line managers.

“Hierarchy can be more significant in some Asian countries than a senior executive from Europe, for example, might be used to, and this can influence how employees interact.”

Human resources teams and in-house counsel within MNCs must also demonstrate suitable risk management rules and policies to ensure all employees have been apprised of the relevant laws and regulations in the jurisdiction in which they work.

“Trainings shouldn’t be limited to issues that may attract criminal proceedings,” says Chiu. “A critical aspect of risk management from the perspective of any company is being able to show that it had in place appropriate policies and rules, and that it communicated those effectively to employees.

“This includes expats, who may be unfamiliar with the rules and policies that may be more obvious to local employees. There should be a more technical/legal part in the pre-relocation training. We often have our local teams giving onboarding training sessions to senior execs (local CEOs) who have just arrived in the country and need to understand the main differences with their home country, including when it comes to personal liability and possible individual criminal sanctions for management/corporate malpractice.

“Also, they need to be told about possible restrictions on indemnification, or director and officer insurance coverage, as these may work differently to what the executive is used to at home,” Chiu adds.

“Awareness of restrictions on their personal activities and mobilities may also be necessary, so they can be mindful when scheduling personal arrangements or travel plans to avoid violating applicable regulations. For example, a chief representative of a representative agency of foreign insurance institutions in China is required by the China Banking and Insurance Regulatory Commission to stay in China working for the agency for no less than 240 days on an accumulative basis in a year.”

Coaching the leaders

Not only is training itself an important factor but who delivers the knowledge is just as significant. “Companies should also think about who is best placed to provide the training. The HR team may be best placed to discuss cultural and other issues, whereas in-house and external counsel should be brought in for regulatory/legal training,” she says.

Jurisdictions have varying laws, so executives need to be fully informed on the local company laws, which may be different from their home country.

“In places such as Hong Kong, directors of listed companies are required by law to attend training at the time of the company listing, and every year thereafter. Companies are required to publish records of directors’ training in the annual report,” Chiu adds.

“Although there is no strict requirement for senior executives to attend training, companies are increasingly requesting that training is extended to their c-suites to ensure that they have a clear understanding of their obligations and liabilities as senior members of the company.”

Sending senior executives and CEOs to Asian countries involves a lot more than simply organizing moving companies, booking a flight and finding a home.

Thrive Tokyo founder Gronauer says every company is different in its approach to preparing senior executives for a move to Japan, with some seeking external consultants like herself, or relying on in-house staff.

senior executives“I find that it really depends on a company’s budget. Some prefer to save on costs by having an in-house staff [member] get their foreign employees set up with an apartment and cell phone and nothing more (which means foreign hires are left to figure out how to live and work in Japan), whereas other companies outsource the entire relocation process as well as cross-cultural business training to relocation companies and trainers for full support,” she says.

“I have yet to meet a foreigner in Japan who doesn’t believe cross-cultural training should be mandatory, but because newcomers are not aware of what they don’t know and are unlikely to seek cross-cultural help on their own when they first arrive, it’s really in the hands of the companies to decide whether or not to offer training.

“And, unfortunately, some companies might invest in relocation support (apartments/cell phones etc.) but not in cross-cultural workshops. It’s important for retention to be thorough as assimilating to working and living in a new culture is a huge adjustment.

“As far as industries, I find that multinational corporations tend to have a structure in place. Japanese companies tend to hire bilinguals who are already experienced with living in Japan.

“So, the industry I’ve found that needs the most support is the tech industry, as they tend to hire foreign talent from abroad who have no prior experience of living in Japan, and these companies typically don’t have a relocation structure in place.”

Practical realities

This is where Gronauer, who is an executive trainer and coach based in Tokyo, steps in. “This is the work I do: one programme is on how to live in Japan (practical, day-to-day info for people who don’t even know how to buy milk, or take the train, or receive a package delivery) and a programme on how to work with Japanese people (communication styles, how to run meetings, leadership qualities, relationship building, etc.).”

senior executivesAccra Law’s De Guzman says that before taking up their posts, foreign CEOs in the Philippines should: (1) ensure they have alien employment permits and work visas before assuming their duties and before signing official documents; (2) refrain as much as possible from signing/taking the personnel actions of firing, demoting, suspending employees and enforcing other employment decisions, and instead delegate these to subordinate local line executives/managers, who may take up the cudgels and act as witnesses for the company in the event of lawsuits; (3) refrain from pursuing/taking aggressive/offensive actions or behaviour against locals, even non-employees, which may be construed as anti-Filipino, to avoid giving a cause of action against them for a possible deportation case.

He adds that a “Ghosn case” occurring in the country is unlikely because of the strict compliance and reporting regulations imposed by the Philippine Stock Exchange (for listed companies) and by the Securities and Exchange Commission over all corporations.

Regardless of which Asian country CEOs/senior executives are sent, it is clear MNCs should ensure their employees are fully prepared when relocating offshore.