In a amazing press release from Nissan in Japan on Monday, November 19, 2018, the world discovered that the chairman of Renault, Nissan Motors and of the Renault-Nissan-Mitsubishi-Avtovaz Alliance had been arrested in Japan for various wrongdoings. The Japanese company, a  43% subsidiary of the French Renault group, currently under a self-limited control by the RENAULT SA Board, indicated having responded to a whistleblower’s complaint about the behavior of its Chairman and former CEO, Carlos Ghosn and of a Nissan managing director Greg Kelly : the first  claim for misrepresentations by Carlos Ghosn’s  on his remunerations to the Japanese Stock Exchange, was subsequently followed by the mention several substantial wrongdoings  by the chairman and CEO of the Alliance who was kept in jail for two months by the Japanese Justice department

The other misrepresentations by Carlos Ghosn as discovered and reported included the personal use of social assets for the benefit of the tycoons’s family,  personal financials, furnitures, leisure housing and activities.  Nissan is cooperating with the Japanese prosecution and is willing  to continue to cooperate with other members of the Alliance, Renault and Mitsubishi. 

The CEO of Nissan, Hiroto Saikawa, requested the Nissan Board of Directors the same November week  to dismiss Carlos Ghosn as chairman and Greg Kelly as Director because of these  violations of the their duties as managers and directors.

For many years, Carlos Ghosn has been at the top of the Proxinvest ranking on executive compensation for French companies, with an average of 12.7 million euros a year since 2009 . This included its pay at Nissan Motors, which had been held hidden for years, despite many questions of Proxinvest to the company , its directors and to the AMF.

For a  long time, the ECGS Managing partner Proxinvest , whose research is available in english as ESGS reports on RESEARCHPOOL , had alerted investors about the failing governance of the group and the excesses of the personal power of Carlos Ghosn, requesting several times the Directors, the French market regulator AMF and the APE public investment agency to intervene on these issues of misleading information.

At Renault’s annual general Meeting of shareholders in April 2016, the chairman of Proxinvest, Pierre-Henri Leroy publicly  challenged the Renault directors in the first place for their vote resignation in favor of Nissan’s  Board on any directors appointment  and executive compensation  decisions: this incredible  waiver was included in a new related party agreement with Nissan which was finally approved by the AGM.  Leroy also publicly challenged Chairman Ghosn on his personal lack of exemplarity on pay.

This 2016 general meeting approve this strange resignation, but  finally surprised by refusing to approve in a non-binding vote the remuneration of the Chairman and CEO of the group. A  governance milestone in France.

Proxinvest was accordingly invited in the fall of 2016 by the Compensation Committee of the Renault Board to expose its analysis of this situation. Two questions from Proxinvest, one about Carlos Ghosn’s possible compensations in Russia and the other about his personal tax regime, were relayed by Patrick Thomas,: the chairman of the Remuneration Committee,  but received then no answer from the attending Renault SA management team led by seniop vice -president Mouna Sepheri..

A few months later, just before the 2017 annual general meeting , another pay scandal broke out following the revelation by  Reuters of a new bonus scheme project,: the scheme finally denied by Carlos Ghosn himself, was to include a special distribution among senior and executive officers of the Alliance, of 80 million euros from expected “group synergies”, new bonuses to be awarded exclusively under the sole and confidential supervision of the chairman of the Alliance, Carlos Ghosn .

The brutal indictment of the chairman of Renault and the breach of trust between Carlos Ghosn and the Nissan management distressed and worried shareholders pleased by the success of the automotive multinational alliance.

The directors of Renault, highly admiring the qualities of their chairman Carlos Ghosn, seems over the years to have been complacent about the unchallenged authority  of this multilingual tycoon,   easily accepting the successive departure of potential successors able to replace him, such as MM.. Pelata or Tavarès, the later having even left to join under no condition  the immediate automotive competitor Peugeot SA …

The worse was clearly the 2016 sacrifice by the Directors,  with some complacency by the State, of their own responsibility and of the power of Renault’s Board of directors to vote freely Nissan chaired by Carlos Ghosn.

Poorly rated by the Proxinvest Corporate Governance Rating in recent years, Renault should quickly reform its general governance. The Board should first elect a new independent chairman, appoint with Nissan the most appropriate excecutive chaiman for the Alliance and  prepare the next AGM for a more independent supervision and transparent governance.  It is certainly possible to restore of much better grounds the international and unitary culture that Carlos Ghosn had partly created.

Bloomberg wrote enigmatically in November 19th, “If the Davos summit was a man it would be Carlos Ghosn.” Is it enough to say that the impunity and the fiscal irresponsibility of multinational groups is once again questioned.

Paris , 20 novembre 2018 / january 16 2019

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