Nissan and Renault are paying the price for underestimating key-man risk. The Japanese carmakers Chairman Carlos Ghosn also chief executive of its French partner understated his compensation in official filings, Nissan said on Monday. His probable exit makes resolving the lopsided partnership harder.
Ghosn is familiar with pay scandals. Reuters reported in 2017 that Renault-Nissan bankers had drawn up plans to channel undisclosed bonuses to him and other managers. Earlier this year his 7.4 million euro Renault pay packet for 2017 just about squeaked through a shareholder vote despite opposition from Frances government, a 15 per cent shareholder.
This time is worse still. Nissan has been investigating Ghosn’s conduct for several months following a whistleblower tip-off. The investigation found that he and fellow board member Greg Kelly had for years underreported Ghosn’s salary in Tokyo Stock Exchange filings. Ghosn also used company assets for personal use, Nissan said. CEO Hiroto Saikawa wants Ghosn removed, while Japan’s
Neither board is short of people who know how to run a car company. Ghosn handed over as Nissan CEO to Saikawa last year. At Renault, Thierry Bollorş was recently promoted to chief operating officer and is Ghosn’s obvious heir.
The problem is Renault-Nissan’s lopsided alliance, under which the Japanese group is 43 per cent owned by Renault but controls just 15 per cent of its partners shares. Investors apply a hefty discount to those stakes, since its unclear whether the two sides will realise value either by fully merging or selling their holdings. Renault Nissan shares, using closing prices before the Ghosn news, were worth about three-quarters of the French groups 18.6 billion euro market capitalisation, which fell 11 percent to 16.8 billion euros on Monday.
As chairman and CEO of the Renault-Nissan-Mitsubishi alliance, Ghosn’s job was to resolve the cross-shareholding mess he’s also chair of Mitsubishi Motors, which Nissan part-owns. When re-appointed at Renault this year, the company said a priority was to take decisive steps to make the alliance irreversible. One option would be for Nissan to buy out the French state as a prelude to a full merger. That’s less likely if the main bridge between the two companies is out of the picture.
(The author Liam Proud ( @LiamWardProud ) is a Reuters Breakingviews columnist. The opinions expressed are his own.)