Nissan chairman to be ousted for significant acts of misconduct

The architect of the Renault-Nissan-Mitsubishi alliance now faces up to 10 years in jail

Photo: EPA Carlos Ghosn, Chairman at Nissan and Mitsubishi, as well as CEO of French car maker Renault

Nissan Chairman Carlos Ghosn, who became one of the auto industry’s most powerful executives by engineering a turnaround at the Japanese manufacturer, was arrested Monday and will be fired for allegedly under-reporting his income and misusing company funds for personal gain. Along with him, another senior executive, Representative Director Greg Kelly, was also arrested and accused of offences involving millions of dollars that were discovered during a months-long investigation set off by a whistleblower.

“The investigation showed that over many years both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount, in order to reduce the disclosed amount of Carlos Ghosn’s compensation,” the Japanese car maker said in a statement on Monday. A day later - Tokyo prosecutors also confirmed publicly that Ghosn was under arrest for "significant acts of misconduct", after reporting income of 4.9bn yen ($51.5m) over five years when his actual compensation for that period had surpassed nearly 10bn yen. Furthermore, Ghosn has created an offshore company in the Netherlands, which has invested abroad. With its capital of over $53.3m - fully paid by Nissan - the company has not engaged in investment, but has acquired luxury properties in Rio de Janeiro and Beirut, which were used by Carlos Ghosn only. Now he faces up to 10 years in prison and a fine of nearly $89,000. 

As a result of the revelations, Mitsubishi, in which Nissan is the largest shareholder, also promised to remove Ghosn off its board. Renault, where he is the CEO, said it would convene a board meeting, where it would decide the future of Ghosn at the end of the week. The Alliance, which has its own headquarters and staff, declines comment for now.

The ouster of Ghosn reverberated across the globe and abruptly threw into question how future of the Renault-Nissan-Mitsubishi alliance would look like without its totemic leader. Or whether there would be future for the alliance at all. The three companies, which together form the second largest car group in the world after Volkswagen, sold 10.6m cars last year - more than any other manufacturer and proved to be stronger than ever. But investors now have doubts whether the removal of Ghosn means the end of the alliance, which he personally shaped and had pledged to consolidate with a deeper tie-up, before eventually stepping back from its operational leadership. Nevertheless, allegations against Ghosn also represent a major blow at a time when Nissan is hardly coping with scandal in which it admitted altering the results of emission and fuel economy tests on vehicles sold in Japan.

Ghosn is of French, Brazilian and Lebanese background and is the first person to ever lead two Fortune 500 companies at the same time. He served as Nissan’s president and CEO from 2001 until last April, when he became the company's chairman. In 2005 he also became chief executive of Renault, leading the two major automakers simultaneously and helping them overcome their cultural differences and geographical distance. In 2016, Ghosn took Mitsubishi Motors’ chairman position, as well.

He is credited with helping bring about a remarkable turnaround at Nissan, resuscitating it from near bankruptcy by cutting thousands of jobs and shutting plants. His triumph in the sector -  increasingly seen as too fragmented and regional to effectively consolidate - made him something of a national hero in a country where foreign CEOs of major Japanese companies are relatively rare. It is no surprise that he became such a star in the business world, that he also appeared on magazine covers dressed in a kimono and he has a manga comic book, based on his life 

However, he has also faced opposition, including over his pay. According to a recent Bloomberg report Ghosn took home some $6.5m from Nissan in the most recent fiscal year, in addition to $8.5m from Renault and about $2m from Mitsubishi. His compensation package from Renault alone prompted an ire with shareholders and sharp criticism from Macron, when he served as France's economy minister. It was his pay that contributed to France's government passing a 'say on pay' law that gives shareholders a binding vote on top executives' salaries.

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