Published: Tue, November 20, 2018
Money | By Bruce West

End of the road for Nissan saviour Carlos Ghosn over pay scandal

End of the road for Nissan saviour Carlos Ghosn over pay scandal

Chairman Carlos Ghosn was arrested on November 19 by Tokyo prosecutors on suspicion of under-reporting his income in violation of the Financial Instruments and Exchange Act, according to people close to the investigation.

Nissan shares have hit a two-year low as its chairman Carlos Ghosn remains in custody over a series of claims including a failure to declare £34.5m in earnings.

Nissan Motor Co.'s high-flying chairman Carlos Ghosn was arrested overnight and will be dismissed after he allegedly under-reported his income and engaged in other misconduct, the company said.

Ghosn's arrest will "rock the Renault-Nissan-Mitsubishi alliance as he is the keystone of the alliance", said Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm.

The chairman was arrested in Tokyo on Monday by Japanese prosecutors for violating Japan's Financial Instruments and Exchange Act by under-reporting his compensation.

In Japanese business, the representative director role is the most senior executive managing role, reporting directly into the board of directors.

The Nissan-Renault-Mitsubishi group is among the biggest auto alliances in the world, selling about 10 million vehicles a year. Nissan goes on to say that Ghosn has been found to be suspect of "numerous" acts of other misconducts, including utilizing company funds and assets for personal use. He holds both Brazilian and French citizenship. While running Nissan, Ghosn became CEO of Renault in 2005 and AvtoVaz in 2012, serving all three companies in the Nissan-Renault chain simultaneously.

Saikawa reiterated Nissan's commitment to the venture, while a Renault statement expressed "dedication to the defense of Renault's interest in the alliance".

Nissan spent 2 billion yen on homes for Ghosn in Rio and Beirut via a Dutch subsidiary, with Kelly overseeing the transaction, the Nikkei newspaper reported, citing unnamed sources.

Ghosn was at Nissan for 19 years and signed a contract this year that would have run through 2022.

"It's easy for a board to be alert when times are tough, but it's very important for a board to maintain their vigilance when times are good", she continues, adding that "sometimes boards can be deferential to an iconic CEO" such as Ghosn. "We celebrate today the start of a new chapter of our company's life", Ghosn said in 2010.

Nissan's Saikawa was asked if Ghosn was a good or bad leader.

Stock prices for Nissan's partner Renault fell by as much as 13% on the news that Ghosn was to be ousted.

In June, Renault shareholders approved Ghosn's 7.4 million euro ($8.5 million) compensation for 2017.

As the misconduct uncovered through our internal investigation constitutes clear violations of the duty of care as directors, Nissan's Chief Executive Officer Hiroto Saikawa will propose to the Nissan Board of Directors to promptly remove Ghosn from his positions as Chairman and Representative Director.

He said that because of the continuing investigation, he could not disclose many details.

A globetrotting polyglot who shook up corporate culture in France and Japan, Ghosn could seemingly do no wrong until disquiet began to mount in recent years over his high remuneration. Mitsubishi and Renault have also not commented, neither has Ghosn's side.

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