Nidec's Accounting Scandal and Its Implications for Corporate Governance and Investor Trust

Nidec Corporation, a global leader in electric motor manufacturing and a key player in the electrification and AI supply chains, has found itself at the center of a corporate governance crisis. Over the past two years, the company has faced multiple accounting scandals, regulatory scrutiny, and a historic 22% single-day stock plunge in September 2025, raising urgent questions about its long-term valuation and strategic credibility. For investors, the repeated governance failures—spanning improper accounting practices, dividend violations, and customs misdeclarations—highlight a systemic breakdown in oversight that could erode trust in Nidec’s ability to navigate the high-stakes transition to electric vehicles (EVs) and AI-driven infrastructure.

A Pattern of Governance Failures

The latest scandal, involving a Chinese subsidiary’s suspected improper accounting practices, is not an isolated incident. In 2023, Nidec disclosed that an external investigation had uncovered a 200 million yen ($1.4 million) payment with documentation suggesting management involvement in irregularities [1]. This followed a prior probe into an interim dividend and share repurchase that exceeded legal distributable limits under Japanese law, revealing “systemic issues” such as inadequate employee training on legal requirements and weak internal coordination [2]. By 2025, the company was again under fire for customs-related misdeclarations in a European subsidiary, prompting delays in its securities filings [3].

These incidents point to a recurring theme: a lack of robust governance structures across Nidec’s global operations. According to a report by Reuters, the accounting probe has reignited concerns about the company’s reliance on its 81-year-old founder, Shigenobu Nagamori, whose leadership has long been scrutinized for opaque decision-making [4]. While Nidec has pledged reforms, including enhanced internal controls and operational manuals, the frequency of these scandals suggests a culture of complacency rather than a one-off misstep.

Investor Trust in Jeopardy

The immediate fallout has been severe. Nidec’s shares plummeted to their lowest level in over a decade following the 2025 scandal, erasing billions in market value [5]. Investor sentiment, already fragile after the 2023 dividend controversy, has deteriorated further. As stated by Morningstar analysts, the uncertainty surrounding the scale of accounting irregularities has made it difficult for investors to assess the company’s financial health, leading to a “lack of confidence in short-term prospects” [6].

This erosion of trust is particularly concerning for Nidec’s ambitions in the EV and AI sectors. The company has positioned itself as a critical supplier of ventilated car seat motors—controlling over 68.66% of the market alongside MinebeaMitsumi—and is expanding into water-cooling modules for AI data centers [7]. However, governance issues could undermine its ability to secure long-term contracts with automakers and tech firms, which increasingly prioritize transparency and compliance. For example, Tesla and NVIDIA—key players in EV and AI—have stringent supplier vetting processes, and any perception of Nidec’s instability could open the door for competitors to poach market share.

Strategic Credibility in the EV/AI Supply Chains

Nidec’s strategic moves, such as its partnership with Airbus on hydrogen-powered fuel cell engines, underscore its vision for a sustainable future [8]. Yet, these initiatives hinge on maintaining credibility with stakeholders. The recent scandals risk overshadowing its technological prowess, particularly in an industry where trust is paramount. For instance, the development of AI-driven climate control systems for vehicles requires close collaboration with automakers, many of whom are already wary of supply chain disruptions and governance risks [9].

Moreover, Nidec’s expansion into grid-scale energy storage—a $151.2 billion market by 2029—relies on demonstrating financial and operational reliability [10]. If investors perceive the company as a high-risk bet, it could face higher capital costs and reduced access to the venture capital and partnerships needed to scale in these emerging sectors.

A Systemic Flaw or a Turning Point?

The question remains: Is this crisis a temporary setback, or does it expose deeper flaws in Nidec’s corporate DNA? The company’s repeated governance lapses—spanning three continents and multiple business lines—suggest a systemic issue rather than a series of isolated errors. While Nidec has taken steps to address the immediate fallout, such as extending securities filings and commissioning third-party investigations, these measures may not be enough to restore long-term confidence.

For Nidec to regain its footing, it must implement structural reforms, including independent board oversight, mandatory compliance training for global teams, and transparent communication with investors. Failure to do so could result in a prolonged erosion of market value and a loss of competitive edge in the EV and AI supply chains.

Conclusion

Nidec’s accounting scandals are a wake-up call for investors and corporate leaders alike. In an era where governance and transparency are non-negotiable, the company’s repeated missteps threaten to undermine its strategic vision and market position. While its technological capabilities remain strong, the path to long-term success will require more than innovation—it will demand a fundamental reset of its corporate culture. For now, the stock’s volatility and the lack of concrete reforms suggest that the crisis is far from over.

Source:
[1] Nidec Shares Slump Amid Accounting Probe -- Update, https://www.marketscreener.com/news/nidec-shares-slump-amid-accounting-probe-update-ce7d59d8d98df52d
[2] Notice regarding the Receipt of the Investigation Report by ..., https://www.nidec.com/en/ir/news/2023/news0616-01/
[3] Notice concerning board of directors' resolution ..., https://www.nidec.com/en/corporate/news/2025/news0626-01/
[4] Japan Nidec's accounting probe sparks record stock plunge, https://www.reuters.com/markets/europe/japan-nidecs-accounting-probe-sparks-record-stock-plunge-2025-09-04/
[5] Nidec shares dive 22% on irregular accounting probe, https://asia.nikkei.com/business/companies/nidec-shares-dive-22-on-irregular-accounting-probe
[6] Nidec Shares Slump Amid Accounting Probe, https://www.morningstar.com/news/dow-jones/2025090476/nidec-shares-slump-amid-accounting-probe
[7] [Ventilated Car Seat Motor Market Outlook 2025-2032], https://www.intelmarketresearch.com/ventilated-car-seat-motor-2025-2032-422-4514
[8] Nidec Leroy-Somer, https://martini.ai/pages/research/Nidec%20Leroy-Somer-787f241513063d0395a68763a5184257
[9] EX-1, https://www.sec.gov/Archives/edgar/data/749098/000119312525066935/d939990dex1.htm
[10] Grid-Scale Electricity Storage Technologies: Global Markets, https://www.bccresearch.com/market-research/energy-and-resources/grid-scale-electricity-storage-technologies-markets-report.html?srsltid=AfmBOoq_yxVfd_pFhFWPHDMk510_EIBtAZq5Xsid9722YQOEJWxii3tF