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Nissan’s Board Removes Carlos Ghosn as Chairman After His Arrest

Nissan’s Board Removes Carlos Ghosn as Chairman After His Arrest

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Nissan’s chairman, Carlos Ghosn, seen above on the screen, was arrested in Tokyo on Monday over a suspected breach of Japanese financial laws.CreditCreditTakashi Aoyama/Getty Images

TOKYO — Nissan’s board of directors voted unanimously to remove Carlos Ghosn as its chairman on Thursday, three days after he was arrested on allegations of underreporting his income to government regulators over a period of several years.

The board’s vote was a grim rebuke of Mr. Ghosn, one of the car industry’s most powerful leaders and the man who saved Nissan nearly 20 years ago.

The board met for four hours and issued a short statement that sought to telegraph stability even amid the sudden leadership upheaval. It emphasized that its alliance with Renault, Nissan’s largest shareholder, was a priority, and that it would consider having an outside adviser review its corporate governance and its director compensation system.

The board said it acted to confirm “that the longstanding Alliance partnership with Renault remains unchanged and that the mission is to minimize the potential impact and confusion on the day-to-day cooperation” with alliance partners.

Greg Kelly, a onetime Nissan human resources manager and a member of the company’s board, was also removed as a representative director, along with Mr. Ghosn.

In a separate statement, Nissan said it had uncovered misconduct committed by Mr. Ghosn that included underreporting his compensation and using company funds for personal expenses. It added that Mr. Kelly “has been determined to be the mastermind of this matter, together with Carlos Ghosn.”

Mr. Ghosn was the architect of the alliance with Renault — Mitsubishi joined in 2016 — and he is credited with the growth and expansion of what is effectively the world’s largest carmaker. Renault, which owns a 43 percent stake in Nissan, has been the dominant partner in the three-company alliance. This week, there have been signs of strain as the saga of Mr. Ghosn’s arrest has played out.

Nissan was swift — followed by Mitsubishi — to call for the ouster of Mr. Ghosn after the car company this week announced its investigation of financial misconduct. Mitsubishi’s board will meet on Monday.

Renault, which employs 47,000 people in France, has been more cautious than its allies.

The French carmaker said that Mr. Ghosn remained its chairman and chief executive, even as prosecutors have questioned him in a Tokyo detention center. The company named an interim leadership team to handle his duties as that investigation continues.

Bruno LeMaire, the French economy minister, and his Japanese counterpart, Hiroshige Seko, met Thursday in Paris and “exchanged views and shared information about the latest situation,” the French ministry said. They reaffirmed the support of the French and Japanese governments for the Renault-Nissan alliance and said they wanted to maintain it.

Neither Mr. Ghosn nor Mr. Kelly has been charged with a crime. Japanese prosecutors boarded Mr. Ghosn’s corporate jet shortly after it landed Monday night at Tokyo’s Haneda airport. That night, both Mr. Ghosn and Mr. Kelly were facing prosecutors asking about Nissan’s internal probe and whether they had hidden a large amount of Mr. Ghosn’s compensation from Japanese authorities.

According to the Tokyo prosecutors’ office, Mr. Ghosn and Mr. Kelly underreported Mr. Ghosn’s compensation from 2011 to 2015 by more than 5 billion yen ($ 44.5 million) — understating his true earnings by half — in filings with a bureau of Japan’s Ministry of Finance.

On Wednesday, a Tokyo court approved the prosecutors’ request to hold Mr. Ghosn at a detention center in east Tokyo for another 10 days. Under Japanese law, prosecutors can detain suspects for up to 22 days without filing charges, and can legally question them without a lawyer present.

Speaking to reporters on Thursday, Shin Kukimoto, deputy chief prosecutor, said the allegations against Mr. Ghosn, who stepped aside as chief executive of Nissan last year, and Mr. Kelly, an American, were serious for the men — and investors.

“Doctoring a securities report is a grave violation,” Mr. Kukimoto said. “It is also important to maintain corporate governance and that is the point investors should pay attention to.”

Mr. Kukimoto gave no further details about the investigation, which could go on for weeks, and could expand to include other allegations of wrongdoing so that prosecutors could detain the suspects even longer.

Suspects are not permitted to have lawyers present while being questioned by prosecutors in Japan. Prosecutors also have wide latitude to question suspects without charging them.

“To prove the suspect’s criminality, you have to conduct a thorough questioning to get the information needed to charge him,” said Yasuyaki Takai, a former prosecutor and defense lawyer who worked with Takafumi Horie, the internet tycoon found guilty of violating securities laws in a notorious trial a decade ago. “The Japanese prosecutors will not indict the suspect unless they are 100 percent sure that the suspect is guilty.”

NHK, the public broadcaster, reported that João de Mendonca Lima Neto, Brazil’s consul general to Japan, visited Mr. Ghosn in detention on Thursday afternoon. Mr. Ghosn, now a French citizen, was born in Brazil. Mr. Lima told reporters that Mr. Ghosn “looks in good health, and I felt he is treated respectfully.”

The directors’ statement on Thursday indicated that board members had reviewed “a detailed report of the internal investigation” and were even considering their own role in the scandal. The statement offered a carefully-worded promise: They had voted unanimously “to study the creation of a special committee to take advice from an independent third party regarding the governance management system and better governance of director compensation.”

Three independent directors were named “to lead on the matter.”

Corporate governance experts noted that Nissan’s board had few independent members. Of Nissan’s seven board members other than Mr. Ghosn and Mr. Kelly, three have worked at Nissan for at least four decades and two are longtime veterans of Renault.

The remaining board members are a racecar driver and a retired economic and trade ministry bureaucrat.

“I have always found it interesting that Nissan’s board has always been stacked with insiders,” said Christina Ahmadjian, a professor of business at Hitotsubashi University in Tokyo.

“The auto companies in general have been slower in governance reform,” she said. “Nissan was a company run by a non-Japanese so it’s always puzzled me why their governance was not more independent.”

Analysts said that Japan’s corporate culture is still quite hierarchical and that clubby boards often have trouble questioning leaders, especially someone as charismatic and forceful as Mr. Ghosn.

“A powerful management should want people who would challenge them,” said Jun Okamura, visiting researcher at Musashino University Institute of Global Affairs. “The board should not be afraid of these disagreements.”

Mr. Ghosn won’t yet be gone from Nissan completely. Although he is no longer chairman, under Japanese corporate law, a full shareholder vote still must be held to eliminate him from the board.

Follow Motoko Rich on Twitter: @motokorich

Makiko Inoue, Liz Alderman and Hisako Ueno contributed reporting.

A version of this article appears in print on , on Page B4 of the New York edition with the headline: Nissan’s Board Removes Ghosn as Chairman After His Arrest. Order Reprints | Today’s Paper | Subscribe

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