Nissan Motor Co.’s executive remuneration for fiscal 2017 may have exceeded the nearly ¥3 billion cap set by shareholders, with a large sum going to arrested former chairman Carlos Ghosn, sources said Wednesday.
While only ¥735 million ($6.5 million) was stated in the company’s securities reports as remuneration for Ghosn in the year that ended March, the sources said the payment to him may have actually been about ¥2.5 billion.
In that case, Nissan may have paid Ghosn, who is facing allegations of falsifying securities reports, and other executives a total of more than ¥2.99 billion in fiscal 2017, eclipsing the cap that was adopted at a general shareholders’ meeting in 2008.
The act could be a “grave breach of trust” to shareholders that could even lead to the delisting of the company, some experts say.
Under company rules, remuneration payments for each executive should be decided through talks involving the chair of the board and representative board members. But the sources believe that Ghosn, the 64-year-old who led the company for nearly 20 years, had effectively been deciding the sum alone.
Ghosn was arrested last week by Tokyo prosecutors for allegedly violating Japan’s Financial Instruments and Exchange Act by underreporting his remuneration by around ¥5 billion over five years to March 2015, even though he received some ¥10 billion in the period.
The prosecutors are also considering building a case against him for allegedly underreporting a further ¥3 billion in remuneration received over three years from April 2015.
Ghosn has denied intending to falsify the financial statements, but admitted that he did not include in the documents part of the remuneration he was set to receive when he retires because the “payments have not been settled,” according to the sources.
Ghosn allegedly believed he should receive some ¥2 billion annually as remuneration. But he instructed Greg Kelly, a former Nissan representative director who was arrested along with him for alleged conspiracy, to submit that he earned ¥1 billion a year in securities reports and was planning to receive the remaining amount after retirement.
The post-retirement payment that was not reported was allegedly about ¥8 billion over the eight years from fiscal 2010.
According to the sources, Ghosn is apparently trying to argue the validity of a purported document that showed Nissan agreed on the payment, arguing that he has not signed it.
Under the financial instruments law, remuneration needs to be disclosed in a securities report when it is fixed, even if the actual payout is planned in the future.
Kelly has denied any wrongdoing, according to his family lawyer in the United States who is offering him legal advice.
“He absolutely believes what he did was legal. He believes it was appropriate. He believes it was with company interest, and he also believes he is not guilty of any criminal conduct, be it in Japan or be it in the United States,” Aubrey Harwell, a lawyer in Tennessee, said in a phone interview.
Harwell also said Kelly “had plans to be with his family back in the (United) States for Thanksgiving,” but he is now in a “difficult situation” as he is detained and being subjected to interrogation.
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