Published on November 21st, 2018 | by Maarten Vinkhuyzen0
Carlos Ghosn — Greed, Stupidity, or a Coup?
November 21st, 2018 by Maarten Vinkhuyzen
As reported yesterday, Carlos Ghosn has been taken in for questioning by the Japanese authorities. He is accused of “serious misconduct” and “numerous other significant acts of misconduct,” according to a Nissan press release. That sounds very serious. What has he done to deserve a prison cell?
He informed the Tokyo stock exchange wrongly about the compensation he received from Nissan, and he misused company assets privately.
This sounds like he did not file correctly what is known in the USA as SEC Form 4, “Statement of changes in beneficial ownership of securities,” from 2010 to 2015. The company assets in question appear to be residences Nissan acquired for him in Brazil and Lebanon.
Filing these kinds of forms is seldom done by the executive himself. It is delegated to the financial staff and an attorney is appointed to supervise it. And how sleeping in a residence the company has put at your disposal is a misuse of company assets is not really clear to me.
The first misconduct happened over a clearly defined stretch of time. The first question to ask is, what happened in 2010 when it started?
That one is very clear. The law on disclosures to the stock exchange about executive compensation changed. Nissan had two scandals the last year about non-compliance with formal regulations. First, it was safety inspections not being performed by certified persons, and second was not updating emission testing to new regulations for many years.
This sounds more like another failure of the Nissan compliance oversight than an executive enriching himself. There are no accusations of overpaying himself or not paying the taxes due on his remunerations.
Misuse of company assets is more mystifying, especially with the added explanation that Ghosn’s other two jobs (CEO of both Renault and the Renault-Nissan Alliance) made oversight difficult. Was he flying in the Nissan plane to an Alliance meeting or sleeping in a Nissan bed while visiting a Renault plant?
It is hard to see what the benefits for Ghosn could have been from these misconducts. Disclosing his pay was not a problem for him. His discussions about it were quite public, as was his opinion that it was too low. Not reporting it correctly did not help him in any way.
Did his greed lead him to compensate his low pay with private use of company assets? That is hard to believe. The amounts are too small and the use was too open to be construed as secretly enriching himself.
Did Mr. Ghosn not understand what was proper use of company assets, or how he had to fill in his payment disclosure forms? This is even harder to believe. These things are delegated to his staff and the accounting department for a reason. His time is too valuable to waste on such topics.
Months of internal investigations sound far more serious than the misconduct uncovered justifies. We can exclude greed or stupidity as the cause that placed Carlos Ghosn in jail.
This raises the question of why this theatre of taking down a Japanese national hero was enacted — taking him into custody when he landed in Japan for a meeting with the Governor of Tokyo. For irregularities like these, you send a questionnaire to his lawyer or at most a subpoena — you don’t surprise him with a public arrest without any prior warning. The press being on site for this spectacle makes this a carefully staged event.
The Financial Times mentions another reason. For months, there have been talks about closer ties between the Alliance partners. I wrote about it half a year ago. While Nissan is very grateful to Renault and Ghosn for saving it nearly two decades ago, the company considers itself to now be the healthier, bigger, superior partner in the Alliance. Renault owns 43% of Nissan stock, giving it much control, while Nissan has just 15% non-voting stock in Renault, making Nissan essentially a very junior partner, which hurts the company leadership’s pride. A merger with Renault and Mitsubishi is likely felt as a French takeover.
The tensions about this have been rising for months. It appears that after nearly 20 years of slow and careful dating, it is still too early for the next step in the relationship. This is very frustrating for the many parents (shareholders) that are waiting for the wedding and the offspring (profits) that it can generate. And then we have this odd news about a very public and confusing arrest of Carlos Ghosn.
Full disclosure: I am a Carlos Ghosn fanboy.
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