Ex-Nissan chief on US$18 million salary: ‘I’m worth it’

The surprise arrest of Nissan’s former chairman on charges of falsifying financial reports is providing a window into possible corporate intrigue at the Japanese automaker. (The Japan News/ANN)

TOKYO (The Japan News/ANN) – The light in his penetrating eyes has not dimmed. On Monday, Carlos Ghosn, the 64-year-old former chairman of Nissan Motor Co., ushered in his 20th day at the Tokyo Detention House in the Kosuge district of Katsushika Ward, Tokyo.

As Ghosn met prosecutors from the special investigation squad of the Tokyo District Pubic Prosecutors Office at an interrogation room, where a voice and video recording device was installed, he said emphatically in English that he was worth receiving every penny of his remuneration.

Some of his contemporaries at the world’s leading automakers make similar amounts. In 2017, the General Motors Co. CEO received about $22 million (about ¥2.5 billion) and the Ford Motor Co. CEO made about $17 million (about ¥1.9 billion).

The special investigation squad believes that the total amount of remuneration Ghosn earned from the business year ending March 2011 to that ending March 2018 reached about ¥17 billion (about $150 million), the period for which he allegedly violated the Financial Instruments and Exchange Law, leading to his first and second arrests.

If this assertion is true, that would mean Ghosn earned an annual remuneration of more than ¥2.1 billion on average, an amount that corresponds with what Ghosn said as his own worth.

In the two most recent years, the amount is believed to be about ¥2.4 billion each year. When this is added to the payments to other Nissan directors, the total sum of executive remunerations exceeds the upper limit of ¥2.99 billion set at the automaker.

“Ghosn doesn’t care about the upper limit,” according to a person close to Ghosn. “He first decides how much pay he will get, intending to receive the difference between that payment and the amount written in the company’s securities reports as deferred payment upon his retirement from the executive post.”

Under the law, those remunerations whose payments have been confirmed must be written into the securities reports, including the amount that would be paid in the future.

“How can you say that this figure has not been confirmed?” a prosecutor said, pressing Ghosn for an answer while showing the memorandum mentioning the amount of the deferred payment written in a detailed figure up to the last digit.

According to sources, Ghosn answered that there is no telling whether a future CEO would indeed pay that to him and economic circumstances would change by then, too. When Ghosn was told by a person related to the issue, who came to see him at the detention house, about the prospect of his being arrested again on another charge, he wore a surprised and discontented look.

While Ghosn said that the best thing for him now was to leave detention, Ghosn showed no signs of acquiescing to prosecutors. Sources said that he looked his usual self on Monday, too. Ghosn confided to those around him that the one thing he could not bear was for him to lower his social standing with a false confession.

Convincing zeal

It was back in November 1998 when Ghosn visited for the first time the then head office of Nissan in the Ginza district in Tokyo. At the top-floor conference room exclusively used for senior executives, Louis Schweitzer, 76, then chairman of Renault SA of France, started saying to Nissan executives that he wanted them to listen to a man who has rebuilt Renault through restructuring.

About 30 minutes later than originally scheduled, Ghosn appeared at the meeting. Renault, which was privatized in 1996, was facing a financial crisis due to a huge deficit. It was Ghosn who closed down the Belgium plant, which boasted having the largest scale for Renault and put the automaker back on its feet.

With zeal and confidence, Ghosn told Nissan executives that it was an important decision. He spoke for about two hours on how the flagging automaker was rebuilt under his leadership. “Closing down a factory in a foreign country could cause an international problem,” a former Nissan executive said, having sensed the then 44-year-old Ghosn’s unfathomable power.

“What strong decisiveness he has. What a man, with such an enormous character.” Due to its go-for-growth policy during the economic bubble, Nissan, too, had fallen into a crisis. Its interest-bearing debts for the business year ending March 1999 stood at ¥2.1 trillion.

The former executive was convinced: “To rebuild Nissan, stringency, and hardheadedness would be needed. He can do what a Japanese cannot.” Nissan decided to come under the wings of Renault and ushered in Ghosn as chief operating officer, responsible for the practical management of the company, in June 1999.

Harsh environment

Ghosn was born in March 1954 in a rural town in the Amazon River basin in the northwest of Brazil. According to his autobiography, he was brought up in a harsh environment in which he took a riverboat for transport in high heat and humidity, in an area infested by mosquitoes and piranhas.

When he was about 6, he, his mother and his elder sister moved to Lebanon, leaving his Brazilian father behind. After graduating from high school in Lebanon, he earned engineering degrees at universities in France. In 1978 he joined the French tire maker Michelin. In was not only in Japan where he was dubbed a cost-cutter, or “Le Cost Killer.”

Soon after he assumed the presidency at Michelin North America in 1989, he announced the closure of a plant there. His autobiography describes his corporate stance as having no fear of ordeals and being able to deal with critical situations. Reforms at Nissan advanced all at once in a top-down style. In October 1999, four months after he became Nissan’s COO, he spelled out the Nissan Revival Plan, a corporate restructuring plan.

Through the plan, five domestic plants closed, including the Murayama plant in western Tokyo, while cutting 21,000 jobs across the entire Nissan group. He cut by half those suppliers of automobile parts where the high-cost structure was deeply ingrained while demanding parts suppliers to lower their prices for ordering in bulk.

“Quality comes ahead of quantity,” Ghosn said at a management meeting, appealing for increasing the profit margin, rather than sales. The company was in the red about ¥684.4 billion for the business year ending in March 2000, the first year under his leadership, but turned things around to post about ¥331 billion in the black in the following business year. In the business year ending in March 2003, the company paid its interest-bearing liabilities in full, as Nissan made a V-shaped recovery in its business performance.