Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Nissan chief Carlos Ghosn 'under-reported salary'

Lex Hall with Reuters  |  20 Nov 2018Text size  Decrease  Increase  |  
Email to Friend

Nissan Motor Co chairman Carlos Ghosn has been arrested for alleged financial misconduct and will be fired from the board this week, a dramatic fall for a charismatic leader hailed for rescuing the Japanese car-maker from close to bankruptcy.

Ghosn is also chairman and chief executive of Nissan's French partner Renault and one of the best known figures in the global car industry.

While the news took the automotive and investment by storm, Morningstar senior analyst Richard Hilgert has kept his fair value estimates for both Nissan and Renault intact, saying it was alarmist to suggest that Ghosn's arrest would lead to the fall of the alliance.

Nissan said an internal investigation, triggered by a tip-off from a whistleblower, revealed Ghosn engaged in wrongdoing including personal use of company money and under reporting for years how much he was earning. 

Carlos Ghosn Renault Nissan misconduct

Carlos Ghosn was hailed as a superstar in Japan for reviving Nissan

Nissan chief executive Hiroto Saikawa said too much power had been concentrated on Ghosn, a rare foreign executive who enjoyed corporate superstar status in Japan for reviving the ailing Japanese brand.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

"Looking back, the concentration of power was something we need to deeply reflect on," he said, confirming the arrest of Ghosn in Japan on Monday.

Saikawa said he could not give specifics on the personal use of company money, but said the wrongdoing was serious and unacceptable and had gone on for years. Ghosn could not be reached for comment.

"To have so greatly violated the trust of many, I feel full of disappointment and regret," Saikawa told a news conference.

"It is very difficult to express this ... It's not just disappointment, but a stronger feeling of outrage, and for me, despondency."

French President Emmanuel Macron said the government, the French car-maker's top shareholder, would be vigilant about Renault and its alliance with Nissan.

Saikawa said he would propose at a board meeting on Thursday to remove Ghosn.

Fair value intact despite shockwave

Despite being shocked by the news, Morningstar's Hilger said there was little cause so far to alter the fair value rating for Nissan or Renault. 

"For now, we have little information that would cause us to change our JPY 1480 fair value estimate for the shares of Nissan or our EUR 88 fair value estimate on the shares of Renault," Hilgert said. 

"If the removal of Ghosn and his management team results in substantial changes in alliance group ownership, our fair value estimates for Renault and Nissan may need to be adjusted.

However, we think there is less than a 25 per cent probability that the alliance would disband.

Headline risk to valuation will be high in the near term, but for patient long-term investors, we view the shares of Nissan and Renault as attractively valued with 4-star ratings.

Le Cost Killer

Known as "Le Cost Killer" for overseeing turnarounds including cuts at Renault, Ghosn has remained popular in Japan despite the massive job cuts that he brought and recent controversy over his lucrative pay package.

Japanese media reported that Ghosn had reported around 10 billion yen (about $A120 million) worth of annual compensation as about 5 billion yen for several years.

Ousting Ghosn, 64, is bound to raise questions about an alliance that he personally shaped and had pledged to consolidate with a deeper tie-up, before eventually stepping back from its operational leadership.

Renault owns 43.4 per cent of Nissan, while Nissan owns 15 per cent of Renault, with no voting rights in a partnership that began in 1999. Since 2016, Nissan has held a 34 per cent controlling stake in its smaller Japanese rival, Mitsubishi.

The Asahi newspaper reported on its website that prosecutors had begun searching the offices of Nissan's headquarters and other locations on Monday evening.

Brazilian-born, of Lebanese descent and a French citizen, Ghosn began his career at Michelin in France, moving on to Renault. He joined Nissan in 1999 after Renault bought a controlling stake and became its CEO in 2001. Ghosn remained in that post till last year.

In June, Renault shareholders approved Ghosn's 7.4 million euros ($11.6 million) compensation for 2017. In addition to this, he received 9.2 million euros in his final year as Nissan chief executive.

 

More from Morningstar

• Tick for media merger spurs boost in Nine's fair value

• Franking changes won't deter stock investors

• Make better investment decisions with Morningstar Premium | Free 4-week trial

 

Morningstar with Reuters

Lex Hall is content editor, Morningstar Australia

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

. Lex Hall is content editor with Morningstar Australia

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend