Nissan has experienced a myriad of governance and compensation concerns connected to the fall of former chairman and CEO Carlos Ghosn, according to a recent New York Times article, including that executives overseeing the investigation concealed findings of an independent investigation. It now appears that Hari Nada, the head of Nissan’s legal department and one of the primary insiders calling for Ghosn’s removal, received $280,000 in “unjust enrichment” himself due to payout dates being changed for his stock-based compensation. Meanwhile, Ghosn’s successor as CEO, Hiroto Saikawa, was pushed to resign after it was revealed he received $440,000 in “excess compensation” beyond the amount to which he was entitled, also in the form of stock-based pay.
The improper payments were not discovered until an internal investigation involving an outside law firm was conducted. However, the firm’s full report which detailed improper payments to management was never shown to the board, with directors complaining that they learned of the misconduct first through the media. Not surprisingly, this heightened already existing mistrust and tensions between the board and management. According to the Wall Street Journal, the pay was in the form of stock appreciation rights, where the execution date was changed to a more favorable date, increasing the payout (which was allegedly used to finance the purchase of Saikawa’s house). Ironically, the broader report shared after a September board meeting only detailed improper payments to directors.
The story ultimately demonstrates a breakdown of trust and deep conflicts of interest among the top executives as well as lack of transparency with the board. While Nissan, in its partnership with Renault, had exhibited some reluctance to adopt the most up-to-date corporate governance standards, it appears this scandal may be enhancing efforts to strengthen Japan's Corporate Governance Code.