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Nissan's Ghosn crisis

Nissan report urges scrapping all-powerful chairman role

Panel blasts 'personality cult' while Ghosn's team complains of 'smear campaign'

A woman drives a Nissan car in France. A committee recommending governance reforms at the Japanese automaker stopped short of proposing changes to its alliance with Renault.   © Reuters

TOKYO -- Nissan Motor is expected to abolish the post of chairman and appoint an external director to head its board, following recommendations announced Wednesday to overhaul the automaker's governance so that oversight and executive functions are clearly separated after the arrest of former chief Carlos Ghosn.

An independent committee said in a report that Nissan needs to strengthen oversight in light of the financial allegations leveled against Ghosn, which stemmed from the "concentration of authority in one director."

Committee co-chair Sadayuki Sakakibara, a former head of the powerful Japan Business Federation lobby, told reporters that the root of the Ghosn scandal was that "at Nissan, the same person led both execution and oversight for more than a decade."

"In the interest of shareholders, we recommend a system in which an outside director is the one that leads board meetings. We believe if Nissan can achieve this in good faith, it will have in place corporate governance that meets standards even globally," he said.

But the body did not make recommendations on the ownership ties between Nissan and French automaker Renault, which together with Mitsubishi Motors form one of the world's top auto alliances.

"The shareholding structure is an operational matter that Nissan should decide on," said lawyer Seiichiro Nishioka, the committee co-chair. "We concluded it would be inappropriate to go that far, as the committee's aim is to improve governance."

The news conference followed a Financial Times report that Renault aims to restart merger talks with Nissan, then launch a bid to acquire another automaker, likely Fiat Chrysler.

The French automaker holds 43.4% of Nissan with voting rights, while the Japanese carmaker owns a nonvoting 15% stake in Renault. The future of their alliance, which gives the French government a voice through its stake in Renault, had been a concern for Nissan before Ghosn's arrest in November.

Some of the committee's proposals could benefit Nissan's independence within the alliance, such as abolishing the powerful chairmanship, which the Japanese automaker feared would be taken over by Renault, and barring Renault and Mitsubishi Motors board members or executives from holding representative rights at Nissan.

On governance, the independent panel called on Nissan to adopt by June committees for nomination, auditing and compensation to prevent a concentration of power, according to its report. It recommended that outside directors hold a majority of seats on the first two committees, and all seats on the remuneration committee. Outside directors also should hold a majority of seats on the board itself, the panel said.

The report faulted the development of a "personality cult" surrounding Ghosn at Nissan. The chairman was "in a way deified" as a savior who rescued the automaker from collapse, and no one felt able to speak up against him, it said.

The chairman and Greg Kelly, a member of Ghosn's inner circle who was arrested alongside him, would transfer or push out directors or employees who would "object, raise questions or not follow directions," the report said.

Nissan's board meetings averaged 20 to 30 minutes during the Ghosn era. Sometimes the meetings were adjourned in fewer than 10 minutes, with Ghosn doing most of the talking.

The panel also found that Ghosn had made "opaque" the operations of certain departments, including human resources, the CEO's office, and the legal and auditing departments. The chairman handed responsibility for these departments to a few trusted figures, including Kelly, who would refuse to provide detailed information on questions about matters such as compensation and personal use of funds.

"It is obvious that Nissan's governance requires improvement" in light of the accusations against Ghosn, Nishioka said at the news conference.

Ghosn's spokesperson issued a statement on Thursday morning, saying the allegations in the report are "part of an unsubstantiated smear campaign against Carlos Ghosn to prevent the integration of the alliance and conceal Nissan's deteriorating performance."

Ghosn acted "at all times with the full authority of the board and its shareholders," the spokesperson added.

Switching to a three-committee structure and leaving the chairman post vacant "won't guarantee proper governance," said Takaki Nakanishi, CEO of the Nakanishi Research Institute.

Some analysts questioned the committee's decision not to weigh in on the alliance structure.

"The cross-shareholding structure between Renault and Nissan lies in the background of Ghosn's alleged financial misconduct, which enabled the former chairman to decide everything," said Katsuya Takeuchi, a senior analyst at Mitsubishi UFJ Morgan Stanley. "It is strange not seeing a reference to the cross-shareholding structure with Renault in the report."

Renault Chairman Jean-Dominique Senard had told reporters on March 12 that he would "respect" the new governance structure proposed by the committee.

The outside governance committee was established in December. The Brazilian-born executive was arrested on Nov. 19 as his plane landed at Tokyo's Haneda Airport. He faces trial on charges of misreporting his compensation and aggravated breach of trust. Ghosn denies the accusations against him.

The panel made no direct mention of what responsibility the current leadership team, including CEO Hiroto Saikawa, might bear for the situation. "Inquiring into individuals' legal responsibility is not" part of its role, Nishioka said.

Nikkei staff writers Soma Kawakami and Bumpei Matsukawa in Tokyo contributed to this report.

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