Nissan moved to oust long-serving boss Carlos Ghosn after accusing him of misleading investors about the size of his salary and misusing company assets for personal gain, marking an abrupt downfall of one of the automotive industry’s most feted executives.
The Japanese carmaker said Mr Ghosn had been arrested by Tokyo prosecutors on Monday after a whistleblower complaint uncovered numerous “significant acts of misconduct”, adding that the company’s board would seek to remove him as chairman at a meeting on Thursday.
“I feel a strong sense of indignation and despair,” Hiroto Saikawa, Nissan’s chief executive, told a packed news conference at Nissan’s headquarters in Yokohama.
The allegations against Mr Ghosn raise troubling questions not only for Nissan, but also Renault and Mitsubishi, who the energetic executive had woven into a three-carmaker “alliance” that has grown into one of the largest auto manufacturers in the world.
As well as chairing Nissan, Mr Ghosn is chief executive and chairman of Renault and chairman of Mitsubishi. He is also chief executive and chairman of the alliance. Shares in Renault closed down 8.4 per cent in Paris having fallen as much as 13 per cent in the immediate aftermath of the arrest. Nissan shares traded in Germany declined 7.8 per cent. Tokyo markets had closed before the arrest was made public.
Bruno Le Maire, French finance minister, said his government’s “first concern is the stability of Renault”, which is partially owned by the French state. President Emmanuel Macron said he “will be extremely vigilant about the stability of the alliance”.
Mr Le Maire is set to meet senior Renault executives to discuss the scandal, but he said it was too soon to talk about a replacement for Mr Ghosn.
Mr Saikawa, who took over as chief executive from Mr Ghosn last year, spent much of the press conference denouncing the legacy of a man who was once hailed for bringing Nissan back from the brink of bankruptcy after joining as chief operating officer in 1999.
He said Mr Ghosn’s influence as chairman of both Nissan and Renault was a “factor” in his ability to carry out the misconduct. “This is the negative aspect of the long regime of Mr Ghosn,” he said. “This is a fact that we need to admit.”
Nissan said the internal investigation had revealed Mr Ghosn had understated his income over many years in an effort to assuage shareholders. According to Japanese media, Mr Ghosn made nearly ¥10bn ($88.7m) over five years through March 2015, but reported only half of what he had received in financial documents in an alleged violation of Japan’s Financial Instruments and Exchange Act.
Mr Ghosn’s pay at Nissan has faced intense scrutiny since 2010 when he became Japan’s best-paid executive in a country where executive compensation tends to be much lower than international standards.
In an interview with the FT earlier this year, Mr Ghosn defended his pay levels.
“Compensation is more scrutinised today than in the past — I have a lot of that . . . and there are lots of questions about what you are doing for society,” he said. “But this doesn’t translate into less demand on performance . . . CEOs have to absolutely perform on the basic scorecard — growth, profit, free cash.”
The Nissan inquiry also accused Mr Ghosn and another board director, Greg Kelly, of misdirecting company investments and personal use of company assets. Nissan said it has been investigating Mr Ghosn and Mr Kelly for months following the whistleblower complaint.
Nissan’s disclosures came shortly after Tokyo prosecutors raided Nissan’s offices on Monday. Mr Saikawa said Mr Ghosn was then arrested by Tokyo prosecutors. The Tokyo District Public Prosecutors Office declined to comment.
At times, Mr Saikawa appeared determined to break down Mr Ghosn’s image as a saviour, referring to the changes that he had “triggered”, but giving the real credit to the value that “a lot of employees delivered”.
Mr Ghosn enjoys rock star status in Japan after rescuing Nissan as its chief executive and part-merging the company with Renault. Until 2017, he served as chief executive of both carmakers. He is due to serve as Renault’s chief until 2022, though previously told the Financial Times he may step back early from the post.
The Renault-Nissan-Mitsubishi Alliance, built up over two decades by Mr Ghosn, is among the world’s largest carmakers, with the three companies linked by cross-shareholdings as well as cost-saving and synergy targets aimed at making them operate like a single company.
Mr Saikawa stressed that the alliance would not be affected by the allegations, although he added he planned to review the structure so that it would “not be reliant on specific individuals”.
Mr Kelly, whom Mr Saikawa described as Mr Ghosn’s close aide, joined Nissan’s North American unit in 1988 and has mostly spent his career in human resources. Before joining the Japanese carmaker, he was an attorney at US law firm Barnes & Thornburg.
“If Ghosn were to have to step down prematurely from either Renault or Nissan, then it would be a setback for one of the major catalysts for Renault stock — namely corporate action to address the present alliance structure,” said Arndt Ellinghorst, lead auto analyst at Evercore ISI.
The allegations against Mr Ghosn come as Nissan has drawn the ire of Japanese authorities after it admitted to falsifying exhaust emission and fuel economy data in July, following a scandal last year when it revealed faults in vehicle inspections on cars sold in Japan.
Renault declined to comment and the alliance was not immediately available for comment. Mr Ghosn and Mr Kelly could not be reached for comment.
Mr Ghosn’s publicly reported annual compensation at Nissan hit a high of ¥1.1bn ($9.8m) in the 2016-2017 fiscal year and he received ¥735m in the most recent financial year along with a ¥227m package from Mitsubishi.
He was paid €7.4m at Renault during 2017, and narrowly won shareholder support for his pay at this summer’s annual investor meeting.
Asked by the FT earlier this year whether it had ever occurred to him that he was paid too much, he said: “You won’t have any CEO say, ‘I’m overly compensated’ . . . It’s not up to me, the board is sovereign on this.”
Additional reporting by David Keohane in Paris