Nissan chairman Carlos Ghosn has been arrested and might face expulsion after Nissan says that he reportedly used company money for personal expenses and other “serious acts of misconduct.”
Nissan has been investigating potential improper practices by Ghosn and Representative Director Greg Kelly, a Nissan board member, for months based on a whistleblower report, according to Reuters. Ghosn is also the CEO of Renault and chairman of Mitsubishi.
“We discovered significant misconduct led by Mr. Ghosn himself,” Hiroto Saikawa, Nissan’s CEO said at a late-night press conference, according to a Nissan translator. “He used the company assets for personal use.”
Nissan is cooperating with Japanese prosecutors. In a company statement, Saikawa has proposed to the board of directors to fire Ghosn, which Saikawa said at the press conference could happen as soon as Thursday, when the company’s board meets. After an internal investigation, Ghosn had supposedly underreported his compensation to authorities for “several years,” according to the New York Times.
“Needless to say, this is an act that can not be tolerated by the company,” Saikawa said at the press conference, adding that he said the company’s partnership with Renault and Mitsubishi wouldn’t be influenced. “The partnership of the three entities will not be affected by this event.”
Nissan has issued a full statement regarding the matter, confirming the internal whistleblower report:
Based on a whistleblower report, Nissan Motor Co., Ltd. (Nissan) has been conducting an internal investigation over the past several months regarding misconduct involving the company’s Representative Director and Chairman Carlos Ghosn and Representative Director Greg Kelly.
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.
Also, in regards to Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed.
Nissan has been providing information to the Japanese Public Prosecutors Office and has been fully cooperating with their investigation. We will continue to do so.
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. Saikawa will also propose the removal of Greg Kelly from his position as Representative Director.
Nissan deeply apologizes for causing great concern to our shareholders and stakeholders. We will continue our work to identify our governance and compliance issues, and to take appropriate measures.
Shares in Renault have fallen over 12 percent in Paris trading, while Nissan shares in Germany fell 10.9 percent, reports Financial Times. French president Emmanuel Macron says that, as a 15 percent shareholder of Renault, “the state will be extremely vigilant on the stability of the group and of the alliance,” according to Bloomberg.
The French government denied reports that it might sell its Renault stake in Nissan in March, according to Financial Times.
Bloomberg notes that Japanese law requires prosecutors to make official charges before a case can be taken to court, which means that just because Ghosn might not be found guilty even though he was arrested. Apparently, his compensation was a topic of criticism, as he got multiple paychecks for his various roles in Nissan, Renault and Mitsubishi:
At Nissan, he was paid about 1.1 billion yen ($10 million) for 2016 and about $6.5 million in the most recent fiscal year. He took home about $8.5 million at Renault and about $2 million from Mitsubishi in the latest period. At Renault, his package for 2017 was narrowly passed by Renault shareholders, but only after he agreed a 20 percent reduction.
Ghosn became COO of Nissan in 1999 after Renault and Nissan formed the Renault-Nissan Alliance, in which Renault bought a 36.8 percent stake in Nissan. He became the CEO in 2001.
At the time, Nissan was on the brink of financial collapse. Ghosn made sweeping, cost-cutting changes by shutting down five domestic factories and cutting 21,000 jobs. His nickname was “Le cost killer.” Under his leadership, he was able to grow Renault and Nissan into competitors that took on Volkswagen and Toyota.
In 2016, Nissan grabbed a 34 percent stake in Mitsubishi Motors and Ghosn became chairman of the company. Just a year later, however, he stepped down as CEO of Nissan, but retained his roles as chairman of Nissan and Mitsubishi and CEO of Renault and Renault-Nissan Alliance.
Nissan found itself in a scandal last year that involved unqualified employees conducting final vehicle inspections of Japanese market cars, which violates the rules of the Japanese Transport Ministry. Nissan had to recall 1.2 million cars and shut down domestic production. It was reported that these improper inspections could have been going on for as long as 40 years.
Correction: Ghosn is Nissan’s chairman, not CEO. The headline has been changed to reflect this.