Authorities in Japan arrested Nissan chairman Carlos Ghosn on Monday for allegedly underreporting his salary in securities filings by about $44 million over several years. Ghosn has been a prominent figure in the auto industry for decades and also serves as the CEO of Renault and chairman of Mitsubishi. The auto manufacturing alliance between the three companies is the largest in the world, responsible for about 11 percent of global car sales.
Nissan had previously conducted an internal investigation into Ghosn’s conduct after a whistleblower accused him of lowballing his compensation and using corporate funds for personal use. According to securities filings, Ghosn earned $6.5 million in cash from Nissan in 2017. The company found evidence of “significant acts of misconduct” by Ghosn and an alleged accomplice, board member Greg Kelly, who was also arrested. The company claimed that it is fully cooperating with Tokyo prosecutors and that CEO Hiroto Saikawa will be recommending to the board of directors that both executives be stripped of their titles. Ghosn had been planning to serve as chairman until 2020.
“Nissan deeply apologizes for causing great concern to our shareholders and stakeholders,” a company statement reads. “We will continue our work to identify our governance and compliance issues, and to take appropriate measures.” Shares of Nissan fell by 9 percent in European markets, while shares of Renault fell by more than 10 percent.
Ghosn became COO of Nissan in 1999 and CEO in 2001. He is widely hailed for saving the company from financial ruin by instituting major reforms, shutting down five factories and slashing 21,000 jobs. He stepped down as CEO in 2016 in order to focus on the broader alliance between Nissan and Renault. Under his leadership, the two companies have split costs for technology development and purchasing materials. Ghosn had stated that he hoped the alliance would sell 14 million vehicles per year by 2022. The world’s largest auto manufacturers currently sell about 10 million cars annually, and the alliance sold 10.6 million last year.
Ghosn’s arrest now puts the future of the alliance into doubt, as it is unclear whether the companies will be able to find someone who can capaciously replace him. The shareholding arrangement between the two companies may also become untenable—Nissan has a 15 percent stake in Renault, while Renault has a 43 percent stake in Nissan.