MSCI ESG Research downgraded Nissan from 'B' to 'CCC' on September 10, 2018, the lowest industry-relative rating on the scale of 'CCC' to 'AAA'.
The downgrade was primarily attributed to systemic failures in governing its corporate behavior.
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Following the recent allegations of personal misconduct and financial manipulations by Nissan Motor’s Chairman, Mr. Carlos Ghosn, MSCI ESG Research, Alan Brett, Head of Governance Ratings, highlights:
- MSCI ESG Research downgraded Nissan from ‘B’ to ‘CCC’ on September 10, 2018, the lowest industry-relative rating on the scale of ‘CCC’ to ‘AAA’.
- The downgrade was primarily attributed to systemic failures in governing its corporate behavior. Specifically, Nissan admitted to undertaking inadequate safety inspections (October 2017) and to falsifying emissions data at five of its domestic plants (July 2018).
- The CCC-rating of Nissan is also a result of weak management of emissions and product safety, two of the most pronounced areas of risk for the Automobiles industry. Other factors contributing to Nissan’s low ESG Rating included over boarded executive directors and an entrenched board, both raising questions as to the effectiveness of board oversight and potentially impeding structural reforms.
- Mr. Ghosn also serves as a Chairman at Mitsubishi Motors (MSCI ESG Rating ‘CCC’) and Renault (‘A’). The three entities were tied together to form the Renault-Nissan-Mitsubishi Alliance. While Mitsubishi Motors is not involved in the cross-shareholdings, it is controlled by Nissan Motor which in turn is controlled by Renault.
- The governance scores for all three entities fall into the bottom quartile relative to peers. Renault was downgraded to ‘A’ from ‘AA’ on August 30, 2018 due in part to the concerns over possible conflict of interests in the role held by Mr. Ghosn, which resulted in significant votes (17.8%) against his re-election in 2017.
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