Why Nissan sacked the man who rescued it

Nissan’s board of directors has voted unanimously to remove Carlos Ghosn as chairman and representative director, following his arrest in Japan on suspicion of using corporate assets for personal gain on Monday.

Effective immediately, the move came despite a plea from alliance partner Renault to postpone the decision. The Nissan board also removed Greg Kelly, who was accused of being a co-conspirator in Ghosn’s alleged financial misconduct, as director.

Nissan is accusing Ghosn of under-reporting his income over multiple years, abusing company expenses and misusing corporate investment funds.

According to Japanese media, prosecutors suspect Ghosn concealed $US44 million of income – more than half of his actual earnings -- between 2010 and 2014.

No replacement for Ghosn has been announced, despite reports that Nissan CEO Hiroto Saikawa will be appointed interim chairman.

For its part, following Ghosn’s arrest in Japan, Renault announced on Tuesday it had “adopted transitional governance measures to preserve the interests of the Group and the continuity of its operations” by retaining – for now -- Ghosn as chairman and CEO but appointing COO Thierry Bollore as deputy CEO with equal powers.

“At this stage, the Board is unable to comment on the evidence seemingly gathered against Mr Ghosn by Nissan and the Japanese judicial authorities,” said the French car-maker in a statement.

“Mr Ghosn, temporarily incapacitated, remains Chairman and Chief Executive Officer. The Board of Directors resolved to appoint Mr Thierry Bollore on a temporary basis as Deputy Chief Executive Officer.

“Mr Bollore will therefore lead the management team of the Group, having the same powers as Mr Carlos Ghosn.

“During this period, the Board will meet on a regular basis under the chairmanship of the lead independent director to protect the interests of Renault and the sustainability of the Alliance.

“The Board decided to request Nissan, on the basis of the principles of transparence, trust and mutual respect set forth in the Alliance Charter, to provide all information in their possession arising from the internal investigations related to Mr Ghosn.

“The Board endorsed the support expressed by the Nissan management to the Renault Nissan Mitsubishi Alliance, which remains the priority of the Group.”

While Ghosn and Kelly are expected to remain Nissan directors until the next regular shareholders meeting in June 2019 (unless an extraordinary meeting is held sooner), Nissan confirmed its support of the alliance with Renault, which holds a controlling 43.4 per cent stake in Nissan. Meantime, the French government is Renault’s single biggest shareholder with a 15 per cent stake.

“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," said the Japanese car-maker in a separate statement.

Nevertheless, some Japanese analysts have described Nissan’s move to oust Ghosn as “a coup” to end the leadership of the man who orchestrated the alliance between Renault, Nissan and now Mitsubishi, making it the world’s biggest car-making conglomerate.

At the same time, more details of Ghosn’s alleged wrongdoings continue to emerge in the Japanese media, including that he used Netherlands-based Nissan subsidiary Zi-A Capital, which transferred funds to a British Virgin Islands tax haven to buy or subsidise luxury homes in Paris, Amsterdam, Beirut and Rio de Janeiro for his personal use.

National broadcaster NHK reported that Ghosn also used company funds to pay for family trips, while the Asahi newspaper claims that Nissan paid his older sister $US100,000 annually despite doing “nothing for the company.”

According to the Nikkei Asian Review, the 64-year-old was heavily involved in the choice of two luxury homes bought with Nissan cash for his personal use in Brazil and Lebanon, costing the car-maker more than $US17.7 million including renovation costs.

The Nikkei reported that one of the homes for which Ghosn negotiated the price and terms was a beachfront condominium in the Rio resort of Copacabana, which belonged to one of his acquaintances.

The Dutch subsidiary's Virgin Islands unit reportedly paid more than $US4.5 million for the property in 2011, before it was gifted to Ghosn.

Nikkei said another Virgin Islands unit was set up by Zi-A Capital to purchase another home for Ghosn in an exclusive neighborhood in Beirut, where he spent time as a child. Ghosn reportedly chose the property, for which around $US8.8 million was paid.

The Japanese publication says that once Ghosn selected a property, the purchase order “would be passed down through Representative Director Greg Kelly to two associates, a non-Japanese senior-vice president and a senior Japanese official, who would handle the paperwork”.

Those two associates are believed to be co-operating with Japanese investigators under a plea bargain deal that would lessen their charges.

The Nikkei reported that at least part of the rent or operating costs of Ghosn's homes in Paris and Amsterdam may also have been paid by Nissan.

Apart from under-reporting his financial compensation, which would be in violation of Japan's Financial Instruments and Exchange Act, Ghosn and Kelly are accused of diverting investment money and misusing company expenses.