September 9, 2019 10:45 AM, EDT

Nissan CEO Ousted Over Pay Scandal

Nissan CEONissan CEO Hiroto Saikawa takes questions from reporters. (Kiyoshi Ota/Bloomberg News)

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Nissan Motor Co. CEO Hiroto Saikawa will step down over a scandal involving inflated stock-linked bonuses, deepening the turmoil that’s enveloped the Japanese automaker since the arrest of former Chairman Carlos Ghosn.

Saikawa, Ghosn’s handpicked successor as CEO, will exit as of Sept. 16 after Nissan’s board voted unanimously to ask him to resign. He will be replaced on an acting basis by Chief Operating Officer Yasuhiro Yamauchi. A permanent replacement will be named by the end of October, the automaker said in a late-night news conference in Yokohama on Sept. 9.

Pressure on Saikawa intensified after reports last week that he and other Nissan executives were paid more than they were entitled to, dealing a final blow to the CEO who had spent the period since Ghosn’s arrest in November trying to right the carmaker. Amid the fallout from losing a leader who loomed large over the company for two decades, Nissan also has been grappling with decade-low profits and job cuts as car sales slow globally.

“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 Sept. 9, dressed in his usual white shirt and jacket without a tie.

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

Nissan CEO

Saikawa (Kiyoshi Ota/Bloomberg News)

Ten Candidates

The board’s nomination committee will select the next CEO from a pool of about 10 candidates, lead Director Masakazu Toyoda said. They include non-Japanese, women and people from Renault SA, Nissan’s biggest shareholder and partner in a global automaking alliance with Mitsubishi Motors Corp.

Renault declined to comment on Saikawa’s resignation.

An internal investigation by Nissan found Saikawa had been overpaid by 90 million yen ($841,000) via stock appreciation rights, including tax adjustments. Under the plan, directors receive a bonus if the company’s share price performs better than a set target. Other executives also were said to have received excess pay.

Although Saikawa’s leadership has come under scrutiny since Ghosn’s arrest for financial crimes, 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 said he wanted the company to accelerate the search for his replacement.

The issue over excess pay first came to light after Greg Kelly, a former senior executive who was arrested along with Ghosn in November, 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 on bail, due to face trial in Tokyo next year on charges 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 automaking 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 uncertified workers to sign off completed 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 in relations between Nissan and Renault since Ghosn’s arrest and an aborted merger with Fiat Chrysler Automobiles NV added to pressure on Saikawa. 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 the Japanese company.

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 which 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, bringing in more outside directors. He continued to lead negotiations on rebalancing the capital ties with Renault before his resignation.