Ghosn’s arrest spurs concerns about oversight

How could one of the world’s most visible employees go about hiding $70 million worth of salary and benefits paid to him by one of the world’s biggest companies without the company knowing it?

Two weeks after Tokyo prosecutors arrested Carlos Ghosn for allegedly underreporting his compensation, that question is still unanswered. What is certain is that Nissan Motor Co.’s own corporate governance rules gave unusual powers to its former chairman, a business celebrity who was given extraordinary deference for having once rescued the automaker from financial ruin. Those powers included near-total say over how much — and how — he was paid, according to Nissan’s own internal rules.

Several people familiar with the prosecutors’ investigation now say the probe appears to hinge on a relatively arcane point of accounting: whether retirement payments were properly booked. Whether or not Ghosn broke Japan’s securities law by feeding the wrong numbers to Nissan’s board and its accountants (at this point, the allegations are unproved), corporate governance expert Jamie Allen says the deeper question is how anyone could have gotten away with that.

“It all comes back to a lack of internal controls,” said Allen, head of the Hong Kong-based Asian Corporate Governance Association. “If the board genuinely didn’t know that the disclosure of his remuneration was inaccurate, that doesn’t say much for governance. And if they did know, they should take collective responsibility for the failure.”

Fights over pay have been a constant for Ghosn almost since the moment he took over in 1999 as chief operating officer of the then-troubled Japanese automaker.