Nissan's action after the collapse of Ghosn following charges of financial misconduct

TOKYO (Reuters) – Nissan Motor Co. shares fell more than 6 percent on Tuesday. The arrest of President Carlos Ghosn the day before sent shockwaves into the business world and cast doubt on the future of the second-largest Japanese automaker and its global alliance.

Nissan said Monday that an internal investigation triggered by a whistleblower's disclosure had revealed that Mr. Ghosn had been guilty of wrongdoing, including the personal use of the company's money and the under-reporting of income that he had been earning for years. He was arrested and would be fired from Nissan's board this week.

Mr. Ghosn is also President and CEO of Nissan's French partner, Renault, and Chairman of the Japanese group Mitsubishi Motors Corp., the alliance's third-largest partner.

Uusting Ghosn will ask questions about an alliance he personally formed and committed to consolidate with a deeper rapprochement before retiring from his operational leadership.

It also highlights the future of Nissan – the alliance's biggest partner – as profits fall due to weak US sales and fiercer competition. Its competitors are investing heavily in new areas of growth such as cars connected to the Internet and autonomous vehicles.

The alleged irregularities of Ghosn also raise questions about the governance of the alliance in which the councils of the three partners are all chaired by a single executive.

At a press conference held on Monday night, Nissan CEO Hiroto Saikawa acknowledged that too much power had been focused on Ghosn and that the implications of his management of Renault and Nissan were unquestionable since 2005.

Prosecutors said in a statement that Mr. Ghosn and his representative, Greg Kelly, had conspired to minimize Mr. Ghosn's five-year compensation beginning in fiscal 2010, about half of the actual $ 9,998 billion yen ($ 88.9 million).

Mr. Ghosn joined Nissan in 1999 and became General Manager in 2001. He held this position until last year and had received 9.2 million euros (10.53 millions of dollars) of compensation for the last year as general manager.

"By underreporting his salary, he essentially deprived Nissan shareholders of the possibility of judging whether the amount of his salary was appropriate," said Toru Ibayashi, executive director of Wealth Management at UBS Securities Japan.

LIVE LUXURY?

The Japanese public broadcaster NHK has announced that Nissan has paid billions of yen for the purchase and renovation of houses for Ghosn in Rio de Janeiro, Beirut, Paris and Amsterdam, citing unidentified sources.

The properties had no commercial purpose and were not among the benefits of Tokyo Stock Exchange deposits, NHK said. The CEO, Saikawa, declined Monday to discuss details about Ghosn's personal use of the money.

Nissan has spent 2 billion yen on Ghosn homes in Rio and Beirut via a Dutch subsidiary, under Kelly's supervision, Nikkei newspaper reported, citing unidentified sources.

Ghosn and Kelly did not comment on these allegations and Reuters could not contact them to comment.

Hitoshi Kawaguchi, Nissan's senior vice president of government relations, spoke on Tuesday with the Japanese government spokesman and told the media that he had asked that good relations be maintained between Japan and France.

The Asahi newspaper, quoted by anonymous sources, reportedly stated that an employee of the company had provided prosecutors with information about Ghosn in exchange for lightened treatment, the second case of plea bargain in Japan – a introduced in June.

Nissan shares fell to a two-year low of 940 yen and fell 5% to 955 yen.

Shares of Mitsubishi, which also announced Monday the demise of Ghosn as president, have slid by 6%. The Renault action lost 8.4% Monday.

The fall of Ghosn is not expected to cause a sharp decline in car sales, limiting the decline in Nissan shares, said Fujio Ando, ​​adviser to Chibagin Securities.

"The fact that the case was revealed as a result of a whistleblowing is also positive overall, in terms of corporate governance. If it had been revealed by strangers, it would have been another story, "he said.