TOKYO - Three-quarters of Japanese companies have no plan to create committees overseeing compensation or executive nomination, a Reuters poll found, reflecting indifference to boosting governance after the arrest of former Nissan boss Carlos Ghosn.
Ghosn, credited with rescuing Nissan Motor Co Ltd from near-bankruptcy two decades ago, has been charged with understating his salary for eight years and temporarily transferring personal financial losses to the carmaker's books.
He has been held at a detention centre for over two months and his lawyer said he may not face trial for at least six months.
Ghosn has denied wrongdoing. Both Nissan and affiliate Mitsubishi Motors Corp have nevertheless stripped him of his titles, and his continued chairmanship of French affiliate Renault SA is uncertain.
The case has brought Nissan's governance to the fore, with critics saying there are few truly independent voices on its board capable of questioning leadership and looking out for regular shareholders' interests. Some managers surveyed agreed.
"I was surprised that Nissan's internal governance over its executives was practically not functioning," a manager of a wholesaler wrote in the survey.
Since Ghosn's Nov. 19 arrest, Nissan's board has created a special committee to improve governance, incorporating external independent experts, and which will likely recommend an increase in external board members and the creation of a committee to oversee compensation.
"Nissan acknowledges that the misconduct by its former chairman Carlos Ghosn and former representative director Greg Kelly was enabled by shortcomings in the company's corporate governance," a Nissan spokesman told Reuters.
"The purpose of the committee is to find the root causes of this misconduct and provide recommendations for creating a more robust and sustainable governance framework worthy of a leading global company."
Some 64 percent of companies in the Reuters Corporate Survey have no plan to set up compensation or nominating committees, whereas 12 percent are considering the matter. Such committees are in place at 21 percent of responding companies and 3 percent plan to introduce committees shortly.
"We are strengthening compliance, but it is impossible to say that misconduct won't occur," a service company manager wrote.
Still, 87 percent of respondents believed it was unlikely their companies would face the same kind of problems over executive compensation, the Jan. 7-16 survey showed.
The Reuters Corporate Survey, conducted monthly for Reuters by Nikkei Research, polled 480 big- and medium-sized firms with managers responding on condition of anonymity. Around 250 answered the questions on corporate governance.
High executive pay is a touchy topic in Japan, where conspicuous consumption is frowned upon and wealth gaps are contentious. Japanese chief executive officers on average are paid just 11 percent of their U.S. counterparts, showed a report by CLSA Japan strategist Nicholas Smith.
Reuters' survey found 38 percent of respondents believe executive pay in Japan should rise to a degree, with 3 percent saying it should be raised substantially. Some 56 percent saw no need to change executive pay and 2 percent said it should be reduced a little.
"In corporate Japan, big pay gaps within the same company leads to lower motivation among employees," a manager of a transport equipment maker wrote in the Corporate Survey.
Ghosn's reported pay in the latest financial year of $16.9 million dollars from Nissan, Renault and Mitsubishi made him among the most well-paid executives at global auto companies.
A stewardship code introduced in Japan in 2014 has prompted domestic fund managers to more actively question boards and management.
But Japanese firms are not required to have a compensation committee and only 26 percent of listed firms do, with the practice being more common among bigger companies, said CLSA's Smith.
Japan slid three places to seventh in a widely watched ranking of corporate governance in Asia, tying with India and languishing behind countries including Thailand and Malaysia, according to a biennial survey by CLSA and the Asian Corporate Governance Association.
The report found that while Japanese efforts to improve governance by introducing better board-level oversight via independent directors and audit committees looked good on paper, boardroom reality had changed little at many firms.