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HR Restructuring at Nissan Case Solution

Solution Id Length Case Author Case Publisher
772 1257 Words (5 Pages) Ritu Gupta, R Muthukumar IBS Center for Management Research : 4110281
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Nissan, an automobile manufacturing firm, had a decent setup and was performing reasonably well until 1990s when it started sinking into a financial trap of its creditors. It wasn’t long before the company decided to find a new partner and form an alliance in order to end the distress. In 1999, Nissan formed an alliance with Renault, a French automobile manufacturer, by selling just over one – third of its stakes. Renault’s Chief Executive Officer, Carlos Ghosn took over the same position at Nissan, as well, and lead both firms. Ghosn realized that Nissan Motor Corporation lacked a vision, direction, and organizational culture, which had led to such serious problems. He immediately started to restructure the organization from all aspects even by putting his job on the line. It wasn’t before long that his efforts started reaping rewards and Nissan Motor Corporation was once again on the road of profitability. After leading both companies for over a decade, the compensation package of Carl Ghosn came into limelight as it was published by one of the leading global magazines. As the figure was disclosed, many stakeholders and media houses started discussing and debating whether such a huge package was acceptable or not. This response aims to strategically analyze whether the compensation package is right or unacceptable.

Following questions are answered in this case study solution:

  1. Problem Identification

  2. Problem Evaluation from Different Aspects

  • From Human Resource Perspective

  • From Strategic Perspective

  1. Recommended Action Plan

HR Restructuring at Nissan Case Analysis

2. Problem Evaluation from Different Aspects

i. From Human Resource Perspective

One way to assess the situation at hand is to evaluate the entire human resource management structure at Nissan Motor Corporation. The analysis will tell us two basic aspects; first, whether the compensation package is similar throughout all level of the firm or is it high for the top management personnel and low for other managerial positions. Secondly, what is the criteria for determining the compensation package i.e. what factor contribute towards it? 

When Ghosn joined Nissan in 1999, he immediately restructured the entire organization from top to bottom. From the number of directors in the board to the compensation package, almost every process was redesigned to suit the new culture. It is clearly mentioned within the case that salaries of all new recruits was increased to attract the best talent. New criteria were formed for performance assessment and promotion & bonuses were tied to it, as well, in order to create a performance driven culture within the firm. So, it is evident that the compensation package was high throughout all levels of the firm and tangible performance measuring criteria were present to determine the compensation package for every employee. Assessing the performance of Carl Ghosn on these two factors will make it apparent whether he deserved the high compensation package or not. 

After joining Nissan Motor Corporation in 1999, strategies of Carl Ghosn started showing results within two years. The market share of the firm started increasing, debt level started dropping, receivable turnovers increased dramatically, and above all, the organization was moving forward with a vision, unlike its earlier times. Though the credit for this successful turnaround of Nissan Motor Corporation goes to every employee within the firm, but it would be unfair to not acknowledge the role of Ghosn who primarily gave the vision to all employees and set tough standards for all including himself in order to ensure the success of the firm; therefore, if a formal performance evaluation of the CEO would be carried out, he would have not only met expectations of all stakeholders but must have exceeded them, as well, in several aspects. So, there is absolutely no point in debating whether he deserved the high compensation package or not because his performance is evident from the company’s financial statements.   

ii. From Strategic Perspective

Another evaluation lens is from a strategic point i.e. how are shareholders managed within the firm i.e. the amount of dividends they are paid annually, and what other benefits are they offered, etc. This strategic evaluation will not only allow to determine the upper limit of the compensation package, but will also provide criteria for justifying the current package. For this purpose, a comparison of the compensation packages of CEOs of different firms within the industry, both globally and regionally, will be carried out.

Nissan Motor Corp Ex-dividend Date

Dividend Amount

March, 2011


Sep, 2010


March, 2008


Sep, 2007


March, 2007


Sep, 2006


March, 2006


Sep, 2005


March, 2005


Sep, 2004


March, 2004


Sep, 2003


March, 2003


Sep, 2002


March, 2002


March, 2001


Sep, 2000


Source: (Dividata LLC, 2014)

The above table shows that as the company started making profits, it shared with its shareholders, which is apparent from the increasing dividends in every year. During the period of March 2008 – Sep 2010, the company did not give out any dividends, but it should be kept in mind that this was the period of global economic recession where many companies, around the world, were under financial distress including Nissan, so it acceptable within the context.  



Compensation Package


Carl Ghosn

US$ 9.8 million


Alan Mulally

US$ 17.4 million


Martin Winterkorn

US$ 15 million


Akio Toyoda

US$ 8.7 million

Source: (Bloomberg, 2014) (Koh, 2010).

The above table shows that Nissan certainly pays slightly higher to its CEO as compared to Toyota, another regional firm, which is also bigger in size and profitability. However, if Ghosn’s compensation package is compared with that of global CEOs of top auto-manufacturing companies such as Ford, Volkswagen, etc., he is certainly paid much less as evident from the table. In addition to this, it should be noted that automobile sector is not the highest paying sector for top management personnel if compared to other sectors such as telecommunication, Information technology, etc. So, it can be established that though Carl Ghosn is compensated considerably well in local terms, but the compensation package is nowhere near in comparison with global auto companies. 

3. Recommended Action Plan

The current disclosure of the compensation package of Nissan’s CEO took place after government decided to modify its policy and made it mandatory for public companies to disclose such details; otherwise, this information would have been hidden from stakeholders for another few years, at least. Moving forward it is recommended for Nissan Motor Corporation that the first step a company should take is to disclose all details of compensation of top management personnel to its shareholders so it doesn’t come as a shock to them, if released from third party.

Secondly, it is recommended that the company should carry out the same formal practice of performance measurement against the set criteria for all top management executives as it does for remaining employees of the firm. This would make the entire compensation and promotion process transparent for all employees of the firm.

Thirdly, while determining the compensation package it is recommended to consider both regional and global package level along with their profitability. Toyota and Ford makes nearly five and three times, respectively as compared to Nissan; therefore, the compensation packages of their CEOs are easier to justify.

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