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Nissan Ousts CEO Over Pay Scandal as Turmoil Deepens

Saikawa will be replaced on an acting basis by Chief Operating Officer Yasuhiro Yamauchi.

Nissan Ousts CEO Over Pay Scandal as Turmoil Deepens
Hiroto Saikawa. (Photographer: Toru Hanai/Bloomberg)

(Bloomberg) -- Less than a year since the dramatic downfall of Carlos Ghosn, Nissan Motor Co. is losing another leader.

Chief Executive Officer Hiroto Saikawa was asked by the board on Monday to step down by Sept. 16. He’ll be replaced by Chief Operating Officer Yasuhiro Yamauchi until a permanent replacement is named by the end of October.

Nissan Ousts CEO Over Pay Scandal as Turmoil Deepens

With Saikawa felled by a scandal over excess pay, the Japanese automaker finds itself in familiar territory, facing questions over its corporate governance and an uncertain future. In the months since Ghosn — the auto titan who ruled over Nissan for two decades — was arrested for allegedly under-reporting his own compensation and misappropriating funds, Nissan has struggled to bounce back.

Under Saikawa’s reign, Nissan distanced itself from his larger-than-life predecessor, while earnings deteriorated and relations with top shareholder Renault SA soured to the point that a mega-merger with Fiat Chrysler Automobiles NV collapsed. Nissan’s next CEO will face the challenge of righting a ship in disarray at a crucial moment, with global automakers rushing to position themselves for the coming age of electric vehicles and robocars.

Pressure on Saikawa intensified following reports last week that he and other Nissan executives were paid more than they were entitled, dealing a final blow to the under-siege CEO. Amid the fallout from losing Ghosn, a leader who loomed large over the company for a generation, Nissan has also been grappling with decade-low profits and job cuts as car sales slow around the world.

“I should have clarified, ironed out everything and handed my baton over to a successor, but I couldn’t finish everything,” Saikawa said to reporters late Monday, dressed in his usual white shirt and jacket without a tie.

“Nissan needed a leader with deft political skills who embodied a clean break with the Ghosn era. Saikawa wasn’t it.”

--Chris Bryant, Bloomberg Opinion columnist
To read the column, click here

The Nissan lifer, 65, betrayed few emotions as he sat alone, taking questions after the board had finished explaining his departure. “I wanted to set things right and resign.”

Ten Candidates

Nissan shares rose as much as 3.3% on Tuesday, a day after the announcement.

The board’s nomination committee will select the next CEO from a pool of about 10 candidates, said lead director Masakazu Toyoda. The prospects include non-Japanese, women and people from Renault, Nissan’s partner in a global auto-making alliance that also includes Mitsubishi Motors Corp.

Renault and its largest investor, the French government, declined to comment on Saikawa’s resignation.

Read more: America’s Top Car Dealer Is Down on Nissan

An internal investigation by Nissan found Saikawa had been overpaid by 96.5 million yen ($901,000) via stock appreciation rights, or 47 million yen after tax.

The probe also estimated that the sum of paid and unpaid amounts related to misconduct by Ghosn and Greg Kelly, a former senior executive who was arrested along with Nissan’s ex-chairman in November, is about 35 billion yen. Ghosn’s defense counsel responded with a statement calling Nissan’s position inconsistent, contradictory and incoherent, adding that Ghosn will continue to fight claims he believes are baseless.

Nissan Ousts CEO Over Pay Scandal as Turmoil Deepens

Although Saikawa’s leadership has come under scrutiny since Ghosn’s arrest, he was reappointed as CEO by Nissan’s shareholders earlier this year. In June, Saikawa said that he should be held responsible for the instability unleashed by Ghosn’s downfall and that he wanted the company to accelerate the search for his replacement.

The issue over excess pay first came to light after Kelly accused Saikawa in a magazine interview of improperly receiving compensation. Nissan doesn’t consider the excess payment to have violated any laws, and Saikawa has denied he ordered the payments, saying the matter was mishandled by staff.

It’s an ironic turn of events for Saikawa, who went from being Ghosn’s protege to the public face of the accusations against him. Nissan’s CEO appeared before the world’s media just hours after the former chairman’s Nov. 19 arrest to denounce his behavior, describing his “indignation” and “despair” at the conduct of his former boss.

Like Saikawa now, some of the allegations against Ghosn related to pay. The former chairman is out of jail on bail and due to face trial in Tokyo next year on charges that he failed to disclose compensation from Nissan, passed on trading losses to the carmaker and redirected company money into his own accounts. Ghosn denies all the allegations.

Rocky Tenure

Saikawa’s tenure as the CEO of one of Japan’s auto-making icons was marked by a series of missteps.

Just months after he took charge in April, 2017, Saikawa was criticized for not having bowed enough when apologizing for having used un-certified workers to sign off on inspections of newly built cars. Calls for him to resign by Japanese media were amplified after he didn’t show up at a press conference to address the falsification of emissions data.

The deterioration of Nissan’s business in the U.S. -- a source of tension between Ghosn and Saikawa before the chairman’s downfall -- has continued into this year. Saikawa has blamed Ghosn’s quest to grow market share in the U.S. at all costs, including by hiking incentives and boosting fleet sales.

The deterioration in relations between Nissan and Renault since Ghosn’s arrest and an aborted merger with Fiat Chrysler also added to pressure. Long-held tensions between the two carmakers over control of their alliance broke into the open after Ghosn was arrested and worsened when Renault’s new chairman, Jean-Dominique Senard, pursued the Fiat deal without telling Nissan.

Nissan Ousts CEO Over Pay Scandal as Turmoil Deepens

French Pressure

Saikawa started at Nissan after graduating from the University of Tokyo in 1977. Much of his career was spent in the purchasing department, a critical function in any company but especially so for an automaker, since procurement can account for as much as two-thirds of the cost of sales.

He served on the board of Renault, Nissan’s biggest shareholder, between 2006 and 2016. During that period the alliance came under pressure from the French state, which had increased its stake in Renault without informing Ghosn.

Saikawa led Nissan’s negotiations with Renault and the French government in 2015 to address an imbalance that left the Japanese carmaker with no voting rights for its stake in the French carmaker. A crisis was averted after the French government pledged not to interfere in Nissan’s governance.

Since Ghosn’s arrest and ouster as chairman, Saikawa has led a companywide overhaul of Nissan’s corporate governance, including by bringing in more outside directors. He continued to lead negotiations on re-balancing the capital ties with Renault before his resignation.

Saikawa will remain a Nissan director despite his resignation, with a meeting of shareholders required to remove him from the board.

--With assistance from Chester Dawson and Kae Inoue.

To contact the reporters on this story: Ma Jie in Tokyo at jma124@bloomberg.net;Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Reed Stevenson, Craig Trudell

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