Nissan's board during an emergency meeting on Thursday removed its chairman, Carlos Ghosn- a hugely influential executive within the automotive industry- following his arrest earlier this week on allegations of falsifying pay and misusing company assets.
Ghosn, who led the Yokohama-based company for nearly two decades, was detained by Tokyo prosecutors on Monday following an internal investigation for several months at the Japanese car giant that revealed "significant acts of misconduct" over many years.
Tokyo prosecutors say Ghosn, 64, earned a salary of about 10 billion yen, or $88.7 million, from 2011 to 2015 but reported only half of that. At a news conference Thursday, Shin Kukimoto deputy chief prosecutor at the Tokyo District Public Prosecutors Office, told reporters the allegations of falsification of financial reporting carry heavy penalties because they distort public markets and violate listed company's requirements for transparency.
Under Japanese law, Ghosn who is is suspected of breaking the Financial Instruments and Exchange Law, could face a maximum prison sentence of 10 years, and a fine of up to 10 million yen ($89,000).
In a statement to the Tokyo stock exchange, which largely echoes what Nissan said on Monday, the carmaker stated its directors, led by CEO Hiroto Saikawa, voted unanimously to dismiss Ghosn, and another senior executive Greg Kelly, the "mastermind" of the scheme, who like Ghosn has been arrested after allegations of financial misconduct.
Nissan, one of the world’s largest carmakers, said that the unanimous decision was made after the board reviewed a detailed report of an internal investigation into the alleged misconduct.
The company also said it plans to set up an advisory committee chaired by Masakazu Toyoda and including Keiko Ihara and Jean-Baptiste Duzan to propose nominations from the board of directors for the position of Chairman of the Board.
Both Ghosn and Kelly will remain members of the Nissan board pending a separate vote by shareholders.
(Data Source: Bloomberg/BBC, Graphic: IP)
Nissan did not immediately name an interim chairman. Renault earlier this week did not removed Ghosn as chairman and CEO despite the accusations as it waits for more details of the criminal investigation but appointed Thierry Bollore, the chief operating officer, as interim chief. Mitsubishi Motors, the third member of the autos alliance Ghosn built, has asked its board of directors to "promptly remove" him as its chairman.
Ghosn hasn’t commented on the allegations or been seen in public since his arrest. The French-Brazilian executive is credited with being the architect of Nissan's 19-year alliance with Renault and saving the Japanese automaker from near bankruptcy during troubled times for the industry.
He served as Nissan’s chief executive from 2001 until April 2017, becoming chief executive of Renault in 2005, leading the two major carmakers simultaneously. The Franco-Japanese alliance, enlarged in 2016 to include Japan’s Mitsubishi Motors. In that year Ghosn became Mitsubishi Motors’ chairman.
The Nissan-Renault-Mitsubishi group is among the biggest auto alliances in the world, employing more than 470,000 people in nearly 200 countries and selling about 10 million vehicles a year.
The shock arrests slammed the stocks of all three carmarkers.
Nissan also said “the board acknowledged the significance of the matter and confirmed that the long-standing Alliance partnership with Renault remains unchanged and that the mission is to minimize the potential impact and confusion on the day-to-day cooperation among the Alliance partners.”
Analysts say the costs of the alliance failing would be huge.
The latest developments bring us to mind Diogenes, the most famous of the Cynic philosophers of ancient Greece, who wandered around Athens carrying a lantern in broad daylight claiming he was searching for an honest man. Unfortunately, the same story continues up to this date, at all levels. When people at high ranking positions set up these examples what to expect from others with less knowledge, power and possibilities. We hope the Ghosn case will turn out fine for him, for the alliance and the whole world.
Tokyo prosecutors indicted Ghosn on two new charges of financial misconduct on Friday Jan.11, 2019, according to a statement from his lawyer Motonari Otsuru.
Ghosn was charged for aggravated breach of trust for allegedly trying to temporarily transfer personal investment losses to Nissan in 2008, while the other charge concerns misrepresentation of his compensation in the period from 2015 to 2017.
The new charges will likely keep the 64-year-old ousted chairman in prison until the beginning of the trial, which is not scheduled for another six months, according to his lawyers.
On Thursday, Nissan said it had filed a criminal complaint against Ghosn with the Tokyo District Public Prosecutors Office.
The Japanese automaker, in a statement, said it filed the complaint "on the basis of Ghosn's misuse of a significant amount of the company's funds. Nissan does not in any way tolerate such misconduct and calls for strict penalties."
Ghosn, appeared in court on Tuesday (Jan 08, 2019) for the first time since his arrest in November on allegations he misrepresented his salary. He denied the allegations, calling them "meritless" and "unsubstantiated”.