2/10/2019 Why Renault-Nissan head Carlos Ghosn was arrested - Business Insider

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No one has the details of why Renault-Nissan head Carlos

Ghosn was arrested — but here are the main theories
Assigned seats on Southwest?
Matthew DeBord Nov. 24, 2018, 9:03 AM Here's how a major change
would set the company apart
from other airlines

Former Renault-Nissan-Mitsubishi head Carlos Ghosn. Keith Tsuji/Getty

Carlos Ghosn, the architect of the Renault-Nissan-Mitsubishi

alliance, was arrested in Japan last week.

Nissan alleged that he had engaged in years of financial

misconduct.

He has yet to be charged.

Ghosn is an auto-industry legend, and if he falls, it would the most

spectacular demise in the history of the car business.

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Last week, the auto industry was rocked to its core when legendary We stayed
overnight in a
executive Carlos Ghosn was arrested in Japan. Boeing 747
converted hotel
— here's what it
Ghosn, 64, was chairman and CEO of Renault, chairman of Nissan, was like inside

chairman of Mitsubishi, and the architect of a tripartite alliance that How this 7-year-
old boy is
in 2017 was the world's biggest automaker by sales. changing the
modeling
industry with his
beautiful long…
Ghosn was a celebrity CEO, a Brazilian-born leader of Lebanese
descent who came of age in France. In the early 2000s, Ghosn took How one
company
charge at the newly formed Renault-Nissan alliance and steered the customizes
trucks and SUVs
two automakers toward revival and global dominance, competing in to better suit
wheelchairs
numerous markets and challenging General Motors, Toyota, and
Volkswagen. Watch what
happens when
you put a 240cc
Honda dirt bike

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2/10/2019 Why Renault-Nissan head Carlos Ghosn was arrested - Business Insider
engine in a toy
He was feted in Japan, where,T as
E C HanFoutsider,
INANCE POhe
L I Tbroke
ICS into
ST R A T Ethat
GY LIFE ALL B bi PRIME

country's insular auto industry. As with the late Fiat Chrysler

POPULAR INTELLIGENCE
Automobiles CEO Sergio Marchionne, his every utterance was
 FROM THE WEB by Taboola 
closely followed on the worldwide car circuit. He was wildly
successful, risk-taking, borderline arrogant and at-times despotic, Sweden Leaves Europe Looking For
but also considered incredibly wise. Answers!
Wait M8

Following his arrest, Nissan revealed that it has passed along a Language expert tells the secret to
whistleblower tip to the Japanese authorities, leading to allegations learning a language in 15 mins a day
Babbel
that Ghosn had been detained in Japan due to financial misdeeds
and fraud. Auto executives have fallen before, but none were as big Assigned seats on Southwest?
Here's how a major change
as Ghosn, and none had enjoyed such long careers at the top.
would set the company apart
from other airlines
Lacking official charges — Japan can hold Ghosn for 20 days before
any sort of indictment — plenty of theories have developed about
what he actually did or didn't do. Here's a roundup:

Ghosn did everything he's been accused of.

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Carlos Ghosn attends the company's annual shareholder meeting in Paris Thomson
Reuters

Ghosn's career has spanned decades, and through all those years,
his swaggering and at-times entitled corporate behavior has been
observed. Prior to Tesla CEO Elon Musk's arrival on the scene,
Ghosn was the undisputed top-dog, rockstar automotive leader. And
he acted like he knew it.

Anybody who has seen the 1970 Oscar-winning film "Patton" knows
the famous speech that George C. Scott, portraying the American
World War II general, delivers toward the conclusion:

For over a thousand years Roman conquerors returning

from the wars enjoyed the honor of triumph, a tumultuous
parade. In the procession came trumpeteers, musicians and
strange animals from conquered territories, together with
carts laden with treasure and captured armaments. The
conquerors rode in a triumphal chariot, the dazed prisoners
walking in chains before him. Sometimes his children
robed in white stood with him in the chariot or rode the
trace horses. A slave stood behind the conqueror holding a POPULAR

golden crown and whispering in his ear a warning: that all

glory is fleeting.

Ghosn, as Nissan's CEO and later as its chairman, might have had
some lieutenants whispering in his ear, but more like he had yes-
men signing off on his pronouncements.
15 things you can buy from
Costco, Amazon, Sam’s Club,
Ten years ago, the arrangement made sense. Ghosn had yoked
and BJ's to be ready for when
together Renault and Nissan in an alliance that against the odds the apocalypse hits
benefitted both automakers. Japan and France were pleased. But
more recently, as Ghosn stepped down as Nissan's CEO, cracks were
showing. He had gotten into fights with the French government,
which controls 15% of Renault, over his compensation. His pay was
also controversial in Japan, where he was an outsider who made far
more than his Japanese counterparts at other major car companies.

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Ghosn perhaps didn't care, because

TECH Fhe
I N Awas
N C E still
P O L Ipaid
T I C S less
S T R Athan
T E G Y other
LIFE ALL PRIME

CEOs. But was he still worth it? Adding Mitsubishi to the alliance
POPULAR INTELLIGENCE
gave the triumvirate additional scale, but the troubled automaker
 
wasn't likely to add much to the alliance's North American business,
where Nissan had been clinging to market share by burning profits
through discounts of slow-selling models.

Ghosn's magic touch seemed to be fading. The spell he had long cast
was breaking. And perhaps that meant closer scrutiny of how he was
running a far-flung global business.
Assigned seats on Southwest?
Here's how a major change
An "investigation" by Japanese authorities "showed that over many would set the company apart
years both Ghosn and [board member Greg] Kelly have been from other airlines
reporting compensation amounts in the Tokyo Stock Exchange
securities report that were less than the actual amount, in order to
reduce the disclosed amount of Carlos Ghosn's compensation,"
Nissan said in a statement last week, after Ghosn was detained in
Japan.

"Also, in regards to Ghosn, numerous other significant acts of

misconduct have been uncovered, such as personal use of company
assets, and Kelly's deep involvement has also been confirmed."

Obviously, these are still allegations, and because of Japanese law,

Ghosn can be detained for weeks without being charged. The worst-
case scenario, of course, is that he's completely guilty, in which case
his fall would be unprecedented in the history of the industry.

The palace coup theory.

Thomson Reuters

This one gained traction early, given that neither Renault nor the
French government was apparently briefed before Ghosn and Kelly
were arrested.

The theory is that Ghosn stepped down as Nissan CEO ostensibly to

focus on fixing Mitsubishi, but that he continued to exercise CEO-
level authority and might have been trying to engineer a full merger
of Nissan and Renault.

That move could have angered Nissan, where some executives

dislike that the French half of the alliance contributes far less
financially than the Japanese part. Japan Inc., as the country's
consolidated business world and auto sector is sometimes called,
could have concluded that it was time for Ghosn to be pushed into
retirement.

Business hasn't been bad — the alliance led the world in sales in
2017 — so it would have been difficult to oust Ghosn on that basis. So
in effect, he was taken out in the corporate world's version of a
"Game of Thrones" move: completely ruined reputationally and
humiliated before the audience that had formerly followed him as
though he were godlike in his powers.

Ghosn had been doing everything he was accused, but

Nissan always looked the other way.
Kiyoshi Ota/Getty Images

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I've been leaning toward this theory,

TECH F I as
N A Ndetails
CE P O Lof
I T IGhosn's
CS S T R A Talleged
EGY LIFE ALL PRIME

malfeasance have trickled out. His pay packages were complicated

POPULAR INTELLIGENCE
because he was being compensated by two entities in Nissan and
 
Renault, and later three when Mitsubishi came on. Like a lot of
globetrotting CEOs, he made copious use of private jets. he lived in
multiple properties on several continents. He had perks on top of
perks on top of perks.

All well and good for a few decades, and you get used to the
companies you run relaxing the ethical standards. (It's much more
difficult to figure our how Ghosn managed to hide millions in Assigned seats on Southwest?
Here's how a major change
underreported compensation — reportedly almost $45 million —
would set the company apart
and it's also unclear how much of the funds at issue might have been from other airlines
tax dodges.)

But when the bottom falls out this fast, nothing is forgiven. And
reports that have emerged since Nissan ousted Ghosn as chairman
last week indicated that he was pushing his luck, by among other
things retaining his sister as a longtime consultant.

Nissan is sick of Renault and the French government

and wants out out the the alliance.
Thomson Reuters

A hastily called news conference in Japan by Nissan, no meaningful

immediate statement from Renault, Ghosn's arrest in Japan, and
Renault's decision to affirm its commitment to Ghosn as Chairman
and CEO while putting an interim exec in charge while Ghosn is
"incapacitated" all suggest that Nissan and Renault aren't on the
same planet here.

It's certainly possible that the game-plan here is to destroy the

alliance from the Nissan side and eventually send Ghosn back tio
France — where he can resume his job minus the two Japanese
carmakers under his control.

From Ghosn's perspective, sitting in a Japanese jail, this would

perhaps be the best short-term outcome.

Ghosn as Nissan Chairman was exercising too much

power behind the scenes.
AP

Contrary to popular opinion, corporate boards are often relatively

powerless, or far too political to really exert much influence. This is
especially true in the auto industry, where the business tends to run
itself when times are good, as they have been for the past five years.

The only major exceptions I can recall in the last decade were:

When General Motors was emerging from bankruptcy and its

board was acting as a sort of multi-headed CEO, in collaboration
with the federal government, which had assumed an equity stake
when it bailed out the automaker in 2009.

When Volkswagen was contending with an effort by Porsche to

take over the entire company, and then much later, when the
Dieselgate scandal shook up the carmaker's leadership. The VW
Group is a mashup of controlling families, powerful executives,
the governments of Germany and the German state of Lower
Saxony, and VW's unionized workforce — all represented on the
board — so the company is in many ways run by dysfunctional
committee.

However, chairmen sometimes wield immense power. The most

obvious example is Bill Ford, who has been chairman of his family's
enterprise since he stepped down as CEO prior to the financial crisis.

Ghosn appeared to occupy a similar perch at Nissan, creating an

arrangement with protege Hiroto Saikawa in 2017 that he might
have believed would ease some of the issues emanating from the

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Japanese side of the alliance. THowever,

ECH F I N A Nthat
CE strategy
P O L I T I C S looks
S T R A T Eto
G Yhave
LIFE ALL PRIME

soured.
POPULAR INTELLIGENCE

 
Saikawa was unsparing in his criticism of his deposed boss last
week, leading to speculation that he had either engineered a coup
himself or been appointed as an assassin by Nissan's board.

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