Arrest of Carlos Ghosn on November 20, 2018

On November 20, 2018, Carlos Ghosn, the chairman of Nissan, was arrested in Tokyo, Japan, on charges of financial misconduct. His arrest marked a significant turning point in the corporate governance of the automotive industry and had widespread implications for the Renault-Nissan-Mitsubishi Alliance.

Background

Carlos Ghosn, a prominent figure in the automotive world, was hailed for turning around Nissan’s fortunes in the early 2000s. He became a legendary figure for his role in revitalizing the company and was instrumental in forming the alliance between Renault, Nissan, and Mitsubishi, creating a leading global automotive group.

Charges

Ghosn was accused of under-reporting his income over several years in official reports to the Tokyo Stock Exchange. The Japanese authorities charged him with violating financial laws, specifically by misrepresenting around 5 billion yen ($44 million) of salary between 2011 and 2015. Additionally, he faced allegations of misusing company assets for personal purposes, further compounding the severity of the accusations.

Impact and Repercussions

The arrest of Ghosn sent shockwaves through the automotive industry and strained the alliance between Renault, Nissan, and Mitsubishi. It raised questions about corporate governance and transparency in the industry, as well as heightened tensions between Nissan and Renault, with differing views on leadership and strategy.

Internally, Nissan faced scrutiny over its management practices and the effectiveness of its compliance and oversight mechanisms. The arrest also led to a restructuring within the company, with several executives resigning or being dismissed in the subsequent probe.

Legal and Corporate Consequences

Following his arrest, Ghosn was removed from his position as chairman of Nissan and Mitsubishi Motors. He faced prolonged legal battles as Japanese prosecutors pursued multiple charges against him. Meanwhile, the French government, a key stakeholder in Renault, expressed concerns over the stability and future of the alliance, pushing for improvements in governance and transparency.

The case unfolded over several years, with Ghosn fiercely denying the allegations and claiming they were part of a corporate coup against him. His dramatic escape from Japan in December 2019 further intensified the international intrigue surrounding the case.

Broader Significance

Ghosn’s arrest placed a spotlight on the challenges of managing multinational corporate alliances and highlighted the cultural and managerial differences between Western and Japanese business practices. It also prompted reforms in corporate governance standards both within and beyond Japan, as companies sought to enhance transparency and accountability.

The downfall of Carlos Ghosn remains a cautionary tale about executive power, the complexities of global business, and the risks inherent in business leadership.