Ghosn’s pay probe spotlight shifts to Nissan, CEO Saikawa

Bloomberg

In the uproar over Carlos Ghosn’s alleged financial improprieties, the former chairman of Nissan Motor Co. has received most of the heat. Now, the scrutiny has expanded to the role of the Japanese automaker and its chief executive officer: Hiroto Saikawa.
Tokyo prosecutors on December 10 indicted Nissan, as well as Ghosn, for allegedly misleading investors and the government about how much the company was paying its top executive. For Nissan, a potential $6.2 million fine for filing false financial statements may only be the start of its troubles.
Prosecutors charged Nissan with breaching Japan’s financial instruments and exchange law by under-reporting Ghosn’s compensation by about $43 million. Ghosn has been in custody in a Tokyo jail since his arrest, with Nissan accusing him of the income-reporting violations and misusing the carmaker’s assets, including Nissan-owned houses. He faces a 10-year prison term if convicted.
The indictments raise questions about Nissan’s corporate governance and cast attention on the leadership of Saikawa, Ghosn’s protégé and a longtime board member, so much so that his job may even be on the line, according to analysts and people familiar with the situation inside the company.
“He’s at risk,’’ said Tatsuo Yoshida, an analyst at Sawakami Asset Management in Tokyo and a former Nissan employee. “Prosecutors are certainly scrutinising the role of Saikawa and other executives.’’
Nissan said Saikawa has “led company-wide efforts to identify and resolve governance and compliance issues” since the start of his tenure. The company, which was scheduled to have a board meeting on Monday, also said its three external directors are discussing the creation of a committee to improve governance and oversight of board compensation.
At the board meeting, directors may postpone a decision on Ghosn’s successor to focus instead on setting up the governance committee, a person familiar with the matter said.
In the four weeks since Ghosn and his deputy, Greg Kelly, were arrested and jailed, Nissan’s board has drawn criticism for having appointed an ex-race car driver to provide outside oversight and failing to set up an external committee on executive pay.
Ghosn’s legal counsel says accusations against the executive are flawed because Ghosn never signed written agreements that he was to receive any deferred payments after retirement, according to a statement by the office of his lawyer, Motonari Otsuru.
At first “the prosecutor said this is the result of two bad eggs that we’re going to indict criminally and if we can just surgically remove them, everything will be fine,” said Stephen Givens, a Tokyo-based corporate lawyer.
Nissan last month removed Ghosn as chairman of the board, but the Japanese automaker’s partner and largest shareholder, Renault SA, has voted to keep the jailed executive as its chairman. In a statement, the French company’s board said its legal council will continue to examine the evidence provided by Nissan.
Renault’s decision to keep Ghosn at its helm may escalate tensions with its Japanese partner, which have all but exploded into the open since his shock arrest. Nissan has long been unhappy about what it considers an outsized French role in the partnership, and is seeking to redress perceived imbalances.
In a sign of deepening divide between the partners, Renault is pushing Nissan to call a shareholder meeting soon to discuss the Japanese automaker’s indictment, governance and the French company’s appointees on Nissan’s board.