Nissan chairman Carlos Ghosn arrested in Japan for understating salary by $44 million
Ghosn's underreporting of his remuneration constitutes a violation of Japan's Financial Instruments and Exchange Act, a crime carrying a punishment of up to 10 years in prison, a fine of up to $88,000, or both
Nissan Motor Co. chairman Carlos Ghosn was arrested in Japan on November 19 on suspicion of understating his salary in Japan by $44 million (5 billion yen). The 64-year-old executive, who is also chairman and CEO of Renault SA and chairman of Mitsubishi Motors Corp., is alleged to have understated his salary over five years from 2011, Kyodo News reported.
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 $88,000 (10 million yen), or both.
Nissan announced in a statement that the company has been conducting an internal investigation over the past several months based on a whistleblower report regarding misconduct involving 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.
Nissan's CEO 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.
In response to this announcement, Philippe Lagayette, lead independent director of Renault, in liaison with board committee chairs Marie-Annick Darmaillac and Patrick Thomas, have expressed their dedication to the defense of Renault’s interest in the Alliance.
Ghosn is credited forthe Nissan Revival Plan, which transformed the company from near-bankruptcy to profitability within two years. Under Ghosn's leadership, Nissan posted higher profit margins and expanded geographically, particularly to China, which is now one of Nissan's key markets by volume.
Nissan has apologized to its shareholders and stakeholders and announced that the company would work to identify its governance and compliance issues and take appropriate measures.