Nissan says CEO Carlos Ghosn lied about salary, misused company money

Galtero Lara
Noviembre 20, 2018

He identified three types of serious conduct: under-reporting income, using investment funds for personal gain and illicit use of company expenses.

Speaking at Nissan's headquarters in Yokohama, Saikawa said the company's management will focus on minimising the impact of the shake-up on the company and its employees.

Tokyo prosecutors believe Ghosn's underreporting of his remuneration constitutes a violation of the Financial Instruments and Exchange Act, a crime carrying a punishment of up to 10 years in prison, a fine of up to 10 million yen, or both.

It was a stunning development that left employees "bewildered" and fellow executives shocked and will pose a daunting test for the Nissan-Renault-Mitsubishi alliance, one of the world's biggest automakers. Mr Ghosn had already begun shedding some of his responsibilities - he stepped down as chief executive of Nissan a year ago, and recently offloaded some day to day responsibilities at Renault as well.

Nissan did not comment on the scope of the alleged misdealing, but other Japanese news agencies reported that Ghosn underreported his income by $44.3 million (5 billion yen) over five years.

Nissan's CEO, Hiroto Saikawa, said the board will meet on Thursday to vote on dismissing both Ghosn and Kelly.

At a press conference on Monday, the Nissan CEO said he felt "despair, indignation, and resentment".

The firm said that it has passed on the information gathered to the Japanese public prosecutor's office, and there are multiple media reports, including from Japanese public broadcaster NHK, that Ghosn has been arrested by authorities in the country.

It's unclear how his arrest will affect his positions with the Alliance.

A spokesman for Renault also declined to comment.

In February he was forced to accept a 30 percent pay cut from the 7.25 million euros ($11.4 million AUD) he took home as Renault CEO past year.

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For his part, Ghosn acknowledged this year that he needed to address questions about succession and the future structure of the alliance.

The news is the latest scandal to sully Nissan's brand. Before joining Renault, Ghosn worked for Michelin North America.

Renault said its directors "wish to express their dedication to the defence of Renault's interest in the [auto] alliance".

Prosecutors later said in a statement that Mr Ghosn and Representative Director Greg Kelly conspired to understate Mr Ghosn's compensation starting in 2010. The announcement came after the Tokyo market had closed for the day, but Nissan global depositary receipts sank more than 11%.

In a note released on Monday, Citi Group indicated that it does not foresee a dissolution of the Alliance.

The situation also illustrates the key person risk that investors face when they buy shares of a company - a topic Barron's explored earlier this year in a Streetwise column ("CEO's Sudden Exit Can Hurt...or Help a Stock", June 16).

Ghosn's arrest will undoubtedly shake up the auto industry, in which he has been a key vocal player for 40 years.

However, expected a change in management style at Nissan and the Alliance.

Mr Saikawa said Nissan would now try to "stabilise the situation, and normalise day-to-day operations" for staff and business partners.

Initially Ghosn, his nickname was "Le Cost Cutter", inspired fears of social and economic upheaval amid plant closings, mass layoffs and the potential damage his reforms might inflict on Nissan's ties with its suppliers.

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