TOKYO -- Nissan Motor Co.'s board voted unanimously Thursday to remove Carlos Ghosn as chairman and representative director, coming another step closer to ejecting the storied auto executive from the Japanese carmaker he once rescued from near bankruptcy.
Led by CEO Hiroto Saikawa, 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.
Both men keep their seats as regular directors, at least for now. That is because the company’s shareholders are the final arbiters on whether Ghosn and Kelly lose that status.
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,” spokesman Nicholas Maxfield said of scrubbing the men off the board.
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.
Nissan also reaffirmed support of its alliance with French partner 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,” Nissan said.
Nissan is also setting up a committee led by the board’s three independent directors to study how to improve corporate governance at the Japanese automaker, following the embarrassing allegations that Ghosn misappropriated millions of dollars over several years.
“The company will further investigate this matter and consider measures to enhance the company’s governance,” Nissan said in a separate filing to the Tokyo Stock Exchange.
Nissan did not name a new chairman following Ghosn’s removal.
The three external directors -- Masakazu Toyoda, Keiko Ihara and Jean-Baptiste Duzan – will nominate a new chairman from the existing board, Nissan said.
“It’s a coup,” said Tatsuo Yoshida, an analyst at Sawakami Asset Management, who used to work at Nissan. “Ghosn's era is over.”
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.
Ghosn remains Renault's nominal chairman and chief executive, although the company has appointed stand ins during his detention in Japan. And Renault's board had urged Nissan's to delay removing Ghosn from his position as chairman, sources familiar with the matter told Reuters.
‘Most serious crime’
Ghosn and Kelly were arrested just three days earlier in a sweep that stunned the nation. Hours after their arrest, Saikawa announced the board’s intention to dismiss both men.
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.
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 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 dismissed any suggestion the investigation might be politically motivated.
“Falsifying the financial statement is categorically one of the most serious crimes in the Financial Instruments and Exchange Act,” he said at a regular press briefing.
“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 team focused on corporate crime, according to NHK.
Nissan’s board can only strip Ghosn’s chairman’s title and Ghosn’s and Kelly’s positions as representative directors. Hence, they still hold their titles as regular directors.
A board member can only be dismissed as a director through a shareholder vote.
The next regular shareholders’ meeting is not expected until June 2019. Nissan would need an extraordinary meeting before then to remove Ghosn and Kelly anytime sooner.
The difference between the directorships is one of power and responsibility. Before the vote, Nissan’s nine-member board had only three representative directors, Ghosn, Kelly and Saikawa.
The board did not name new representative directors at its Thursday 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.
Mitsubishi Motors has said its board plans to vote on removing Ghosn as its chairman next week. Nissan owns a controlling 34 percent stake in the smaller Japanese automaker, and Ghosn became chairman after Nissan took control in late 2016.
Nissan’s framework sets up the potential for a shareholder showdown, when it comes time to fully excise Ghosn and Kelly from the company. Nissan’s French partner Renault -- where Ghosn still keeps his titles as CEO and chairman -- 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.
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, both 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 could expect Renault to marshal its 43.4 percent voting power behind whatever recommendation comes out of Nissan’s board on these matters.
Without Ghosn or Kelly -- both men reportedly have been locked in a Tokyo detention center since their arrest -- Nissan’s Thursday vote went ahead with the remaining seven members.
In addition to the three external directors, the board includes Nissan lifer Saikawa, as well as Nissan executive Hideyuki Sakamoto and former Nissan Vice Chairman Toshiyuki Shiga.
Bernard Rey, a former president of the Renault Formula One team, is also on the board.
Here is a look at each of them:
Out of action
• Carlos Ghosn, 64: Arrested and detained in Japan. The legendary turnaround artist who saved Nissan from bankruptcy was a high-flying rock star executive. Until the very company he saved accused him of pocketing millions through financial misdeeds.
• Greg Kelly, 62: Arrested and detained in Japan. The American attorney rose through the ranks focusing mostly on human resources, first at Nissan North America, then at headquarters in Japan and ultimately for the entire alliance. He joined the board in 2012 but was tarred upon exit as the “mastermind” behind Ghosn’s alleged schemes.
• Hiroto Saikawa, 65: President and CEO. The Nissan lifer joined Japan’s No. 2 automaker in 1977 and rose to prominence as the point man in the Renault-Nissan Purchasing Organization, the innovative cross-company team that bolstered the carmaker’s profits while pushing down costs. The longtime Ghosn protégé soured on his boss after taking full control as sole CEO in April 2017. Only then did Saikawa begin charting his own course for the company and reversing some of the questionable business strategies pursued by Ghosn.
• Hideyuki Sakamoto, 62: Executive vice president for manufacturing and supply chain management. Globetrotting Sakamoto has almost done it all since joining Nissan in 1980. The fluent English speaker has worked at the Nissan Technical Center North America in the U.S. and for Renault in Brazil. He has even worked as at the parts supplier Calsonic Co. on an exchange program. Sakamoto began his career as a body test engineer and rose to lead global product engineering before tackling his new duties in worldwide manufacturing in January.
• Toshiyuki Shiga, 65: Warhorse Shiga has seen the Alliance unfold evolve and rapidly expand, all up close and personal. Ghosn was so impressed with the business acumen of this veteran corporate planner that he tapped Shiga as his COO in 2005. Shiga joined the board the same year and was promoted to vice chairman under his erstwhile mentor in 2013. Shiga dropped that title in 2017 but continues to serve on the board.
• Jean-Baptiste Duzan, 72: The French financial guru began his career at the Citibank group in 1970, moving through Paris and other international assignments. Duzan, an outside director sitting on the Nissan board since 2009, landed in Yokohama by way of a 23-year career at Renault. During his tenure at the French automaker, he was director of financial operations and senior vice president of purchasing. He served more than a decade on Renault’s management board before retiring from the company in June 2009, the same month he joined Nissan.
• Bernard Rey, 72: This former president of the Renault Formula One team has bounced back and forth between France and Japan since starting his career at Renault in 1969 and working in purchasing. When Renault staged its 1999 rescue of the then-faltering Nissan, Ghosn handpicked the French executive as one of the 30 Renault leaders he would bring to Japan to spearhead the Nissan’s revival. Rey returned to Renault to 2007 and retired from the carmaker in 2011. He was named to the Nissan board three years later.
• Keiko Ihara, 45: A lead-footed speed-demon, this professional race car driver has a penchant for tearing up the track in a Nissan GT-R or any other car with 300-plus horsepower. A long-time ambassador for motorsports, she was appointed to the board in June as part of a nationwide campaign to inject more outside voice into the male-dominated hierarchy of Japan Inc. Ihara’s interest in racing began during her days as a grid girl for Formula One. But it really took off when she realized she could drive the cars and not just stand beside them. She soon became the only female racer from Japan competing in the grueling World Endurance Championship series.
• Masakazu Toyoda, 69: Another appointment meant to shore up corporate governance with third-party input, Toyoda brings insight into the inner workings of Japanese government. A longtime official at the power Ministry of Economy, Trade and Industry, Toyoda specializes in trade relations, international affairs and energy. He joined Nissan’s leadership team in June.
Naoto Okamura contributed to this report