Nissan board ignores Renault request not to oust Ghosn

November 22, 2018 12:48 CET
UPDATED: Nov 22 18:50 – adds details

TOKYO — Nissan’s board voted Thursday to remove Carlos Ghosn as chairman and representative director despite a plea from alliance partner Renault to postpone the decision.

The board also decided to strip representative director status from Greg Kelly, the American director accused of being a co-conspirator in Ghosn’s alleged misdeeds.

In a statement released after the resolution, Nissan said the board acted in response to an internal investigation that uncovered financial misconduct by Ghosn and collusion by Kelly.

“The company will further investigate this matter and consider measures to enhance the company’s governance,” Nissan said in the filing to the Tokyo Stock Exchange.

Nissan accuses Ghosn of under-reporting his income over multiple years, abusing company expenses and misusing corporate investment funds. Japanese media say prosecutors suspect Ghosn hid 5 billion yen ($44 million) of income from 2010 to 2014. The income he disclosed to authorities was less than half his actual haul, the reports say

The decision was unanimous and is effective immediately, Nissan said. The company did not announce a replacement for Ghosn – confounding reports that CEO Hiroto Saikawa was to be appointed interim chairman.

Before the meeting, two Renault board directors had demanded a postponement of the vote to fire Ghosn until the internal probe and legal proceedings were complete, sources familiar with the matter told Reuters. Failing that, they had warned that the French carmaker would exercise its right under the alliance master agreement to appoint Ghosn’s successor and a fourth Renault nominee to the Nissan board, the sources said.

The ultimatum was issued in a strongly worded response to Saikawa, who had informed Renault in an earlier confidential missive that the Nissan investigation was expanding to include Renault-Nissan finances.

After the board presentation and its summary of findings, however, the tune in Paris had changed. “The accusations are extreme, certainly, but they are also precise,” said an official at French President Emmanuel Macron’s Elysee Palace office. “We know there’s a flourishing conspiracy theory about all this, but that’s really not our thinking.”

Renault’s board on Tuesday kept Ghosn in his posts as chairman and CEO but appointed Chief Operating Officer Thierry Bollore as deputy CEO with the same powers as Ghosn.

Nissan reaffirmed its support of its alliance with Renault. “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,” the Japanese automaker said in a separate statement.

Despite losing representative director status, Ghosn and Kelly are expected to keep their seats as regular directors, at least for now, because the company’s shareholders are the final arbiters on whether Ghosn and Kelly lose their positions.

The board did not name new representative directors at its meeting. Representative directors are empowered to act as legal representatives for the company in such matters as entering business deals. The responsibility also brings special liabilities.

The board is expected to recommend that shareholders vote to dismiss Ghosn and Kelly as directors, but the timing of a shareholders’ meeting has not been set. “That is a natural extension of this whole process,” Nissan spokesman Nicholas Maxfield said.

The next regular shareholders’ meeting is not expected to happen until June 2019. Nissan would need an extraordinary meeting before then to remove Ghosn and Kelly anytime sooner.

Shareholder showdown

Nissan’s framework sets up the potential for a shareholder showdown, when it comes time to fully excise Ghosn and Kelly from the company. Renault holds a controlling 43.4 percent stake in Nissan.

But Nissan may not need to worry about the Renault voting bloc thanks to a stopgap clause in its alliance agreement with the French automaker, spokesman Maxfield said.

Nissan says that clause was added in 2015, when Renault and Nissan had an earlier standoff over possible interference in the Japanese company’s corporate governance. At the time, the French government — which is Renault’s single biggest shareholder with a 15 percent stake — was moving to increase its control over Renault. To allay Japanese concerns about government meddling, Renault agreed to limit its formal control of Nissan.

The upshot of the deal, the sides agreed, is that Renault will exercise its voting rights in support of any Nissan board decision regarding the removal, appointment or compensation of a board member. Thus, Nissan would bank on Renault to put its 43.4 percent voting power behind whatever recommendation comes out of the Nov. 22 meeting of Nissan’s board.

The removal of Ghosn clouds the direction of the Renault-Nissan alliance, which he had personally shaped and pledged to consolidate with a deeper tie-up despite reservations at Nissan.

“It’s a coup,” said Tatsuo Yoshida, an analyst at Sawakami Asset Management, who used to work at Nissan. “Ghosn’s era is over.”

Even as Nissan’s board was meeting, new details of Ghosn’s alleged malfeasance were trickling out in the Japanese media. National broadcaster NHK reported that prosecutors suspect Ghosn received about 100 million yen ($885,300) in unreported funds from a Netherlands-based subsidiary.

Ghosn is also alleged to have used a Nissan subsidiary to buy homes around the world — in Paris, Amsterdam, Beirut and Rio de Janeiro — for his personal use. That company is also based in the Netherlands, but it was unclear whether the two Dutch entities were the same.

NHK also reported that Ghosn also allegedly funneled company funds to pay for family trips. The Asahi newspaper reported that Ghosn’s elder sister received about $100,000 a year from Nissan for an advisory position that “did nothing for the company.”

Deputy Chief Prosecutor Shinji Akimoto of the Tokyo district public prosecutors’ office told a press conference on Nov. 22 that the investigation wasn’t politically motivated.

“Falsifying the financial statement is categorically one of the most serious crimes in the Financial Instruments and Exchange Act,” he said. “When a crime is suspected and there is evidence, we will carefully judge if it warrants an indictment. We won’t do that, with an agenda in mind.”

Meanwhile, Ghosn has secured a high-profile Japanese defense attorney who formerly led a Tokyo prosecutors’ office team focused on corporate crime, according to NHK.

You can reach Hans Greimel at hgreimel@crain.com. — Follow Hans on

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