Nissan chairman Carlos Ghosn arrested after internal probe finds he under-reported his income

  • The Japanese carmaker says it is seeking to remove Ghosn – among the most prominent car industry leaders globally – as chairman
PUBLISHED : Monday, 19 November, 2018, 8:02pm
UPDATED : Monday, 19 November, 2018, 11:28pm

Nissan Motor chairman Carlos Ghosn has been arrested over suspected financial violations, NHK reported on Monday, and the carmaker said it will seek to remove the industry icon as its chairman after an investigation into his alleged misconduct.

Ghosn, among the most prominent car industry leaders globally and also the chief executive of Renault, was detained over a suspected breach of Japanese financial law, Japan’s national broadcaster said. Based on a whistle-blower tip, Nissan has been doing an internal investigation over the past several months into suspected financial misconduct involving Ghosn and director Greg Kelly, the company said. Nissan seeks to remove both Ghosn and Kelly.

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The company will hold a board meeting on Thursday to fire Ghosn, Hiroto Saikawa, its chief executive, told a news conference on Monday. “On Thursday, I will call a board meeting to make a proposal to remove him from the position of chairmanship, and approve it,” said Saikawa.

The chief executive apologised profusely for the discovery that Ghosn allegedly engaged in serious financial misconduct. He said: “Beyond being sorry I feel great disappointment, frustration, despair, indignation and resentment.”

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. He said Ghosn’s arrest shows power was too concentrated in one person and that Nissan plans to reduce its reliance on a single leading executive.

As far as Nissan’s relationship with Renault and Mitsubishi goes, Saikawa said it would not be affected by Ghosn’s arrest. “The partnership among the three entities will not be affected by this event. Rather, we will closely work together with all the partners to contain any possible confusion,” he said.

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Nissan earlier said: “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, to reduce the disclosed amount of Carlos Ghosn’s compensation.”

Japanese media reported that Ghosn had reported around 10 billion yen (US$88.6 million) worth of compensation as about 5 billion yen.

The company said it has been providing information to Japanese prosecutors and is cooperating fully with their investigation. Ghosn voluntarily went with Tokyo prosecutors, the Asahi newspaper reported.

A representative for the Tokyo prosecutors said they do not comment on individual cases.

A spokesman for Renault also declined to comment. Shares of the carmaker fell by as much as 15 per cent in Paris, while Nissan’s global depository receipts sank by more than 11 per cent.

Known as “Le Cost Killer”, Ghosn is credited with reviving Nissan and has remained popular despite the massive job cuts that he brought and recent controversy over his lucrative pay package.

Ghosn, 64, built the three-way union of Renault, Nissan and Mitsubishi Motors. He said in September that he would continue to pare back his roles at the three individual companies, while continuing to head their alliance.

A spokesman for France’s finance ministry declined to comment on the report. The country owns about 15 per cent of Renault and supported Ghosn’s renewal at the helm of the French carmaker.

Among the best paid executives in both Japan and France for several years, Ghosn’s compensation has regularly drawn criticism. He receives numerous paychecks in his multiple roles as chairman of the Renault-Nissan-Mitsubishi alliance, CEO of Renault and chairman of both Nissan and Mitsubishi.

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At Nissan, he was paid about 1.1 billion yen for 2016 and about US$6.5 million in the most recent financial year. He took home about US$8.5 million at Renault and about US$2 million from Mitsubishi in the latest period. At Renault, his package for 2017 was narrowly passed by shareholders, but only after he agreed to a 20 per cent reduction.

Ghosn has been contemplating his career moves as the companies plan to change the pact’s structure, possibly through a merger. Ghosn gave up his role as CEO of Nissan last year and has said that he may step down as CEO of Renault before his four-year term ends in 2022, fuelling speculation the alliance could lose its architect and main leader of the past two decades.

The carmakers have given themselves two years to decide on a possible merger between them or find an alternative mechanism to enhance their partnership, Bloomberg News reported in July. Ghosn said in September that the companies will “clarify everything” within the first half of his current Renault CEO term.

Additional reporting by Associated Press and Agence France-Presse