Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Nintendo Board Cultivated a Culture of Play
Transcript
- Lucas: We've talked a lot on this show about how boards handle crises — hostile takeovers, CEO scandals, safety failures. But today I want to look at a board that built its entire identity around protecting something intangible: a culture of play. Luna: You're talking about Nintendo. And I have to say, when I think 'board of directors,' 'play' is not the first word that comes to mind. Lucas: Exactly. Most boards are about risk management, shareholder returns, compliance. Nintendo's board has always had a different priority — preserving the creative spirit that made the company matter in the first place. And that's led to some fascinating governance decisions. Luna: Give me a concrete example. Lucas: Let's start with 2015. Nintendo was in a rough spot. The Wii U had flopped — sold only about 13 million units, compared to the Wii's 100 million. The stock was down. Activists were grumbling. And the board made a move that a lot of analysts thought was odd: they appointed Shigeru Miyamoto to the board. Luna: The guy who created Mario and Zelda. A game designer, not a finance guy. Lucas: Right. Miyamoto had been at Nintendo since 1977. He'd never run a P&L. His job was making fun games. But the board said: 'We need someone in the room who represents the creative core.' It was a signal that Nintendo would not become just another mobile gaming company chasing quarterly revenue. Luna: So they literally put a creative visionary on the board. How many public companies do that? Lucas: Almost none. Most boards are packed with former CFOs, ex-CEOs, consultants. But Nintendo's board has historically been insular and focused on product. In fact, for most of its history, Nintendo had exactly zero outside directors. It was all internal executives — from engineering, game design, sales. That's almost unheard of in a publicly traded company. Luna: Wait — no outside directors at all? How does that work with governance requirements? Lucas: Japan's corporate governance code has looser requirements than, say, the US. But even by Japanese standards, Nintendo was an outlier. As of 2024, their board had only one external director — a former banker named Shinya Takahashi, who joined in 2020. Compare that to Sony, which has seven outside directors out of eleven. Luna: So the board is basically the senior creative team. That must create some interesting dynamics. Lucas: It creates a kind of cultural fortress. But it also has risks. The Wii U failure is a perfect example. That console was designed by a committee that was too insular — they misread the market because nobody on the board was challenging the assumption that a second-screen experience was what players wanted. There was no outside voice saying, 'Wait, this is confusing.' Luna: So the lack of external perspective hurt them. But then the Switch came along and was a massive hit. Lucas: And here's the interesting part. The Switch was developed under the same board, the same insular culture. So the board didn't suddenly become more diverse or open. What changed was leadership. Satoru Iwata, who was CEO until his death in 2015, restructured the company to break down silos between hardware and software teams. The board supported that because they understood the product — they didn't need a consultant to explain why integration matters. Luna: So the board's deep product knowledge was an asset when the strategy was right, but a liability when it was wrong. Lucas: Exactly. And that's the central tension in Nintendo's governance. The board's homogeneity protects the culture, but it can also amplify groupthink. Luna: Let's talk about the culture they're protecting. What does 'culture of play' actually mean in a boardroom context? Lucas: It means decisions are made with a primary question: 'Does this make the game more fun?' Not 'Does this maximize margin?' or 'What do our shareholders want?' There's a famous story from the development of the original Wii. The hardware team wanted to include a high-definition graphics chip. It would have added cost and delayed the launch. Miyamoto — not on the board at the time, but as a senior creative voice — argued that fun gameplay mattered more than graphical fidelity. And he won. Luna: And the Wii became a massive hit with casual gamers who didn't care about graphics. Lucas: Exactly. The board backed that bet. And they've consistently rejected the temptation to chase mobile gaming trends aggressively, even though that's where the industry growth was. Instead, they've doubled down on first-party intellectual property — Mario, Zelda, Splatoon, Animal Crossing. That's been their moat. Luna: But that strategy also means they miss out on some opportunities. They were late to online gaming, late to subscription services... Lucas: And that's where the board's insularity can be a weakness. They've been slow to adopt modern digital infrastructure. Nintendo Switch Online is still pretty barebones compared to PlayStation Plus or Xbox Game Pass. But the board seems comfortable with that trade-off — they'd rather be excellent at a few things than mediocre at many. Luna: It's a very Japanese approach, isn't it? Long-term thinking, craft over scale. Lucas: It is. And it's embedded in how the board evaluates CEO performance. They don't just look at quarterly earnings. They look at things like 'character' and 'understanding of the Nintendo philosophy.' When Iwata passed away, the board chose Tatsumi Kimishima, who had been a banker, but also had deep respect for the culture. And now they've chosen Shuntaro Furukawa, who started in the sales division. Every CEO has been someone who 'gets' the product. Luna: That's a big contrast from the typical American CEO search, where you often see someone from a completely different industry parachuted in. Lucas: Exactly. And that's a deliberate board choice. They're saying: the most important qualification is alignment with our creative mission. Financial expertise can be hired underneath. Luna: But let's be honest — this only works because Nintendo has an incredible track record of hits. If the Switch had flopped, that board would have faced enormous pressure. Lucas: Absolutely. And they've had their share of failures — the Wii U, the Virtual Boy, the 3DS's rocky start. The board has had to defend their approach during tough times. And that's where the lack of outside voices becomes a real risk. When everything is going well, the culture is a strength. When it's not, you need someone who can say, 'Maybe our assumptions are wrong.' Luna: So what's the lesson for other companies? Should more boards put a creative person in the room? Lucas: I think the broader lesson is about board composition matching the company's strategic advantage. If your competitive edge is operational efficiency, you want a board full of operating experts. If it's creative culture, you need people who understand that culture. Nintendo's model is extreme, but it works for them. Luna: I want to come back to something — the fact that they've only had one external director. That's changing a bit now, right? Lucas: It is. In 2020 they added Shinya Takahashi, who's a former banker and outside board member. And in 2024 they appointed a second external director, a lawyer. So they're moving, slowly, toward more conventional governance. But they're doing it on their own terms — not because an activist forced them. Luna: That's actually a smart middle ground. Keep the internal creative majority but add a couple of outside perspectives to catch blind spots. Lucas: Exactly. And that's the kind of thoughtful evolution that I think makes Nintendo's board a really interesting case study. They're not dogmatic — they're willing to adapt, but they won't sacrifice the core identity. Luna: You know, speaking of thoughtful approaches — I think a lot of what makes shows like this possible is that listeners like you support them. We keep Boardroom Conversations ad-free, and that's by design. Lucas: Yeah, it's a conscious choice. And a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: It's a small thing that makes a real difference in keeping the conversations independent. Now, back to Nintendo — one thing I find fascinating is how the board handles succession planning. Lucas: That's a great thread to pull. Nintendo's CEO succession has been remarkably stable — only four CEOs in the past 75 years. And the board has a very deliberate process. They don't just look at candidates; they groom them. Luna: How does that work in practice? Lucas: Well, take Genyo Takeda. He was a senior game designer, worked on Punch-Out!! and Star Fox. In 2015, after Iwata's death, Takeda served as interim president alongside Miyamoto. But the board didn't pick either of them for the permanent role — they chose Kimishima, who had been running the Pokemon Company. But they kept Takeda and Miyamoto on as 'creative fellows' — a role that doesn't exist in most companies. It's like being a board member without the governance duties. Luna: So they found a way to keep the creative visionaries involved without putting them in charge of operations. Lucas: Exactly. And that's a governance innovation that many companies could learn from. You don't have to put your best creative talent in the CEO seat — you can create a shadow role that preserves their influence. Luna: I think what strikes me about Nintendo's board is how intentional they are about everything. Every decision — from board composition to succession to product strategy — ties back to a clear philosophy. Lucas: And that's the takeaway. A board doesn't have to be a generic governance machine. It can be a cultural guardian. But that only works if the culture is actually worth guarding. Nintendo has spent decades building a culture that delivers joy through play. Their board's job is to make sure nothing destroys that. Luna: I think that's a fitting place to leave it. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to everyone listening.