Nissan’s Corporate Governance Needs to Be Overhauled, Committee Says
Former Chairman Carlos Ghosn wielded too much power, special committee says
Former Nissan Chairman Carlos Ghosn arrives at his residence in Tokyo on March 8. PHOTO: BEHROUZ MEHRI/AGENCE FRANCE-PRESSE/GETTY IMAGES
YOKOHAMA, Japan— Nissan Motor Co. NSANY -0.36% needs to overhaul its corporate governance structure to curtail the power of its most senior executives, a committee of advisers appointed by the car maker said Wednesday.
The Special Committee for Improving Governance was set up in December by Nissan, in the wake of then-chairman Carlos Ghosn’s arrest for alleged financial misconduct.
The committee’s report blamed a lack of oversight of Mr. Ghosn for the alleged wrongdoing. The board and audit committee didn’t fulfill their responsibility to provide oversight of Mr. Ghosn’s decision-making, said Seiichiro Nishioka, co-chair of the special committee and a retired judge.
The primary cause of the problem was “the concentration of all authority in Mr. Ghosn, including those regarding human affairs and compensation issues,” the special committee said in the summary of its findings.
GHOSN CASE
- Renault-Nissan-Mitsubishi Shakes Up Management After Ghosn Arrest(March 13)
- Carlos Ghosn Replaces Lawyers, Hires ‘the Razor’ to Lead Defense (Feb. 13)
- Curtain Falls on Carlos Ghosn’s Reign Atop Renault (Jan. 24)
- The Fall of the House of Ghosn (Dec. 16, 2018)
- Nissan’s Carlos Ghosn Arrested, to Be Ousted as Chairman Amid Financial Misconduct Probe (Nov. 19)
The committee—comprising Nissan’s three independent directors and four outside advisers—determined that “there are facts sufficient to suspect violations of laws and regulations” by Mr. Ghosn and Greg Kelly, a Nissan board member. The committee used the findings from Nissan’s internal investigation to reach their conclusion. Both Messrs. Ghosn and Kelly have said they are innocent.
The committee didn’t ask either Mr. Ghosn or Mr. Kelly to rebut Nissan’s findings, said Mr. Nishioka. “From the internal report we were able to determine there were governance problems,” he said.
A spokesman for Mr. Ghosn said in an emailed statement that “Mr. Ghosn acted at all times with the full authority of the board and its shareholders, and his paramount goal was achieving value for Nissan’s shareholders. The allegations of wrongdoing in the report were part of an “unsubstantiated smear campaign.”
Mr. Kelly’s U.S. lawyer called the accusations against his client “absolutely not accurate.”
The report suggested broad overhauls to Nissan’s board and governance structure, changes that would look familiar to employees of many publicly held companies.
Among the recommendations, the report suggested Nissan set up board committees to determine executive compensation and board director nominations.
Under Nissan’s current system, the chairman has almost sole power to determine director and executive pay. Board member nominations are made by the entire board.
The report also suggested that a majority of Nissan’s board be composed of independent directors, and that the chairman of the board be one of the independent directors. Currently one-third of Nissan’s nine-member board is independent.
The nomination committee should have the power to remove board members and senior executives, the report said. The committee should also seek to ensure board members are changed regularly. Several of Nissan’s board directors have been in their positions for over a decade.
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Carlos Ghosn, the former Nissan chairman, posted bail of nearly $9 million Wednesday and was released from a Tokyo detention center more than three months after his arrest. WSJ's Peter Landers explains what's next. Photo: Kyodo News via AP
The committee also took to task the board for its effectiveness. Until June, when Nissan named two new independent directors, the average length of a Nissan board meeting was 20 minutes, which the committee said was too short.
The report also questioned the effectiveness of Nissan’s internal auditors. The committee recommended that a majority of the company’s statutory auditors be independent directors.
Nissan’s senior executives shouldn’t hold roles at either of its alliance partners,Renault SA or Mitsubishi Motors Corp. , the report said. Mr. Ghosn was until recently CEO and chairman of Renault and chairman of Mitsubishi. The goal of this change is to prevent conflicts of interest, Mr. Nishioka said.
Renault has the right to nominate a senior Nissan executive under its shareholding agreement with the Japanese car maker. Previously, it used that power to nominate Mr. Ghosn as Nissan’s chairman. Renault’s new chairman, Jean-Dominique Senard, has said he would seek to become Nissan’s vice chairman instead.
The committee also recommended curtailing the authority of the office of the CEO and the secretariat, which handled paperwork regarding Mr. Ghosn’s compensation. The report recommended oversight of these departments.
The special committee said Nissan should implement the recommended changes by the end of June. Nissan’s board will review the findings and determine which recommendations it will put for a vote at the company’s shareholder meeting in June.
Write to Sean McLain at sean.mclain@wsj.com
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