Nissan Chairman Carlos Ghosn was arrested together with Representative Director Greg Kelly for accusation involving violation of financial laws, Japanese officials confirmed on Tuesday. The executives allegedly connived to under-report Ghosn's salary, declaring only $44 million within a five-year period ending in March 2015.
The controversy spread on a worldwide level as Ghosn is the brain behind a powerful Alliance among three big carmakers and is currently sits at the board of these three companies at the same time. Aside from Nissan, he is the chairman and CEO for Renault and also the chairman for Mitsubishi.
Under Ghosn's clout, the three carmakers worked together to compete with other big players in the auto industry. Among the alliance's top rivals were Volkswagen and Toyota. Together, this alliance sold 10.6 million cars in 2017 alone according to CNN.
Top executives from Renault, Nissan, and Mitsubishi report to three other CEOs while Ghosn is like the glue that held them together.
Making matters worse for the fallen chairman is that these three companies shared ownership as well according to Bloomberg. Renault has a 43.5 percent stake in Nissan while the latter has a 15 percent stake in Renault. Nissan owned 34 percent of Mitsubishi's stock.
The controversial arrest of the Nissan chairman also negatively impacts shares for the carmakers. Nissan shares were down about 4 percent by midday Tuesday while Mitsubishi plunged by more than 7 percent. Renault shares dropped more than 8 percent.
Ghosn's alleged financial misconduct could have particular impact for Renault as the French government holds 15 percent stakes of the company.
In a statement, Nissan Motor Co. revealed that a whistleblower led the company to launch an internal investigation over the past several months. The internal inquiry found that for many years both Ghosn and Kelly have been reporting compensation in the Tokyo Stock Exchange securities that were less than the actual amount. This was done in order to reduce the disclosed value of Ghosn's actual salary.
Bloomberg estimated that Nissan paid Ghosn about $10 million for 2016 and about $6.5 million in the most recent fiscal year. Renault also paid him approximately $8.5 million while Mitsubishi paid him approximately $2 million.
Bloomberg reported that the Nissan chairman earned about $17 million during the most recent period, an amount which could only account for the average compensation received by other executives who are only working for a single company. In comparison, General Motor's Marry Bara earned $22 million, Ford Motor's Jim Hacket took home $16.3 million, Daimler AG's Dieter Zetsche earned $15 million, and Volkswagen AG's Matthias Mueller $12 million.
Nissan said in its statement that its internal investigation also uncovered other acts of misconduct committed by Ghosn, which includes utilizing company assets for personal use. In all these, it was found that Kelly was deeply involved in the whole process.
Nissan Chief Executive Officer Hiroto Saikawa said he will propose to the Nissan Board of Directors to expel Ghosn and Kelly from their respective positions. Mitsubishi echoed a similar move.
With his arrest, Ghosn is facing a maximum punishment of up to 10 years in prison and a fine of up to $89,000.
