Nissan Motor Co was hit by a sharp share-price drop after the arrest of chairman Carlos Ghosn triggered a crisis at the Japanese automaker and its global alliance partners.
The company said an internal probe, launched after a whistleblower tip-off, found allegations that Ghosn had used company funds for personal purposes and failed to disclose his full compensation for years. Nissan said he would be removed from its board that week.
Ghosn also served as chairman and chief executive of Renault, Nissan’s French partner, and as chairman of Mitsubishi Motors Corp, the third company in the alliance. His arrest raised immediate questions about the future of the partnership he helped shape and the governance structure around it.
Nissan CEO Hiroto Saikawa said at a late-night news conference on Monday that too much authority had been concentrated in Ghosn’s hands. He added that the implications of his leadership over both Renault and Nissan had gone unchallenged since 2005.
Prosecutors said Ghosn and Representative Director Greg Kelly conspired to understate Ghosn’s compensation over five years starting in fiscal 2010. They said the amount was about half of the actual 9.998 billion yen, or $88.9 million.
Ghosn joined Nissan in 1999 and became chief executive in 2001. He held that role until last year, when he received 9.2 million euros, or $10.53 million, in pay for his final year as CEO.
Questions also emerged over luxury properties linked to him. Japanese public broadcaster NHK reported that Nissan paid billions of yen to buy and renovate homes for Ghosn in Rio de Janeiro, Beirut, Paris and Amsterdam, citing unnamed sources. NHK said the properties had no business purpose and were not disclosed as benefits in filings to the Tokyo stock exchange.
Saikawa declined to discuss the specific allegations about Ghosn’s personal use of company money. The Nikkei newspaper separately reported, also citing unnamed sources, that Nissan spent 2 billion yen on homes for Ghosn in Rio and Beirut through a Dutch subsidiary, with Kelly overseeing the transaction.
There was no immediate comment from Ghosn or Kelly on the allegations, and Reuters said it could not reach them for comment.
The fallout spread beyond Nissan. Hitoshi Kawaguchi, a Nissan senior vice president handling government relations, met Japan’s top government spokesman on Tuesday and told media he had asked that relations between Japan and France remain good.
The Asahi newspaper, citing unnamed sources, said a company employee provided prosecutors with information on Ghosn in exchange for lighter treatment. It said the arrangement marked the second instance of a plea deal in Japan, a system introduced in June.
Markets reacted quickly. Nissan shares fell to a two-year low of 940 yen before later trading 5 percent lower at 955 yen. Mitsubishi shares, after the company said on Monday it would remove Ghosn as chairman, fell about 6 percent. Renault shares dropped 8.4 percent on Monday.
Analyst Fujio Ando, an adviser at Chibagin Securities, said the scandal was unlikely to cause a steep fall in car sales, limiting the downside for Nissan’s stock. He also said the whistleblower-led exposure of the case was a positive sign for corporate governance.
“The fact that the case came to light because of a whistleblower is also positive on the whole, in terms of corporate governance. If this had been revealed by outsiders, that would have been a different story,” he said.
Reporting by Chang-Ran Kim and Sam Nussey; additional reporting by Hideyuki Sano, Ayai Tomisawa and William Mallard; editing by Stephen Coates and Muralikumar Anantharaman.
