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Nissan's Ghosn crisis

Five things to know ahead of Nissan's shareholders meeting

Tensions rise as Renault seeks greater influence in Japanese partner's governance

Shareholders will vote on Nissan CEO Hiroto Saikawa's  reappointment as director on June 25. 

TOKYO -- Nissan Motor will put its governance reform plan to a vote at its 120th annual general shareholders meeting on Tuesday. The reforms are intended to prevent the kind of concentration of power seen under former chairman Carlos Ghosn.

Nissan and its biggest shareholder, French automaker Renault, initially butted heads over the reforms, but the latter is now expected to give its approval after securing greater representation on new governance committees to be set up under the plan.

However, there have been signs of strain within the French-Japanese alliance, raising questions over the future of the relationship.

Here are five things to know ahead of the shareholders meeting.

What is Nissan's governance reform plan?

As part of a governance overhaul in response to the arrest of Ghosn last November, Nissan has proposed establishing nomination, remuneration and audit committees chaired by and composed mainly of outside directors.

This followed the advice from a third-party governance committee that Nissan had set up last December. In the committee's view, the concentration of power in one person raised the risk of it being abused. Ghosn, who faces charges of understating remuneration and misuse of company assets following his arrest, was chairman of the board and the company. Ghosn denies any wrongdoing.

Nissan initially proposed giving Renault Chairman Jean-Dominique Senard a seat on the new committees. Senard has been a Nissan board member since April.

Why did Renault initially oppose the plan?

Earlier this month Senard sent a letter to Nissan CEO Hiroto Saikawa saying the French automaker would abstain from voting on the reform plan unless it was given greater representation on the new committees. Because Renault holds a 43% stake in Nissan, this would have prevented the proposal from receiving the two-thirds majority needed to pass.

In return for backing the plan, Renault demanded that its CEO, Thierry Bollore, be given a committee seat, along with Senard.

"In Nissan's proposal, I am the only member [from Renault] appointed for the committees, and CEO Bollore is not included," Senard said at Renault's shareholders meeting on June 12, adding that he wanted Renault to have a seat on at least two of the committees.

How did the two automakers reach an agreement?

Nissan announced last Thursday that an agreement was reached on committee appointments and Renault will now vote in favor of all proposals at the shareholders meeting.

Senard will sit on the nomination committee and Bollore will join the auditing committee. Yasushi Kimura, adviser at oil refiner JXTG Holdings, is to serve as chairman of the board, according to Nissan's plan.

Renault said in a statement that it "welcomes Nissan's decision to grant Renault's representatives a seat on the committees of the Nissan board," and that "The agreement reached on Renault's presence in Nissan's new governance confirms the spirit of dialogue and mutual respect that exists within the alliance."

What is in store for the alliance?

While Renault and Nissan were able to reach an agreement on this issue, their two-decade alliance, which includes newer member Mitsubishi Motors, was already showing signs of strain even before this latest discord.

Following Ghosn's arrest, Renault made a merger offer to Nissan in April, reflecting the French government's wish to make the alliance "irreversible," but this was rejected by Nissan. Saikawa has said the Japanese carmaker wants to focus on revamping its faltering sales for now.

Renault also failed to convince Nissan to go along with plans for the French carmaker to merge with Fiat Chrysler Automobiles, leading the Italian-American automaker to walk away from the deal.

French finance minister Bruno Le Maire sought to reassure Nissan as tensions within the alliance mounted over the failed merger plans. Earlier this month, he told the Nikkei Asian Review that Paris would be "open" to Renault reducing its stake in Nissan if it would lead to "better governance."

Meanwhile, Renault and Nissan are trying to push their joint operations forward. The two automakers announced last Thursday that they have agreed with Waymo, a unit of Google parent Alphabet, to assess the feasibility of a partnership to develop self-driving vehicles for use in France and Japan.

Will Saikawa remain on the throne?

Another point to watch at the shareholders meeting will be the fate of Saikawa.

Leading proxy advisory firms Glass Lewis and Institutional Shareholder Services have recommended that shareholders vote against Saikawa being reappointed director. Saikawa was a representative director when Ghosn allegedly engaged in financial misconduct, the firms say, and they cannot confidently support him in a position of oversight over other directors.

Saikawa needs the support of at least half of voting shareholders. Many institutional investors base their votes on advice from the two advisory firms, though it is unclear how much weight their guidance carries with other shareholders.

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