Nissan Motor’s shares fell nearly 6 percent on Tuesday after the arrest of its chairman, Carlos Ghosn, on Monday created ripples across the business world.
Nissan had said on Monday that an internal investigation triggered by a tipoff from a whistleblower revealed that Mr Ghosn underreported his pay.
The embattled official was arrested and would be fired from Nissan’s board this week, the company said.
The arrest sent shockwaves through the business world and threw into doubt the future of Japan’s leading automaker and its global alliance.
Mr Ghosn– chairman and chief executive of Nissan’s French partner, Renault, and Japan’s Mitsubishi Motors Corp, the third partner in the alliance – was also accused of personally using company money and, for years, underreporting how much he was earning.
The development brings into focus the future of Nissan – the biggest partner in the alliance – at a time it is seeing falling profits due to weak U.S. sales amidst heightened competition from rivals who are investing heavily in new growth areas like internet connected cars and self-driving vehicles.
On Tuesday, one Nissan headquartered manager told Reuters he was concerned decision making at the alliance could slow due to the lack of a unifying figure.
He added that he was also worried Mr Ghosn’s departure could hit sales as fans of the charismatic leader abandon the company and corporate customers bound by compliance rules put orders on hold due to the scandal.
Prosecutors said in a statement that Mr Ghosn and Representative Director Greg Kelly conspired to understate Mr Ghosn’s compensation over five years starting in fiscal 2010 as being about half of the actual 9.998 billion yen ($88.9 million).
The embattled chair joined Nissan in 1999 and became its CEO in 2001, remaining in that post until last year and had received 9.2 million euros ($10.53 million) in pay for the final year as CEO.
Nissan has been slow to strengthen its governance, with outside directors linked to the alliance or lacking business experience, said Zuhair Khan, head of Japan research at Jefferies. “Even in poor governance Japan, Nissan under Carlos Ghosn stood out for bad governance structure,” he said.
On his part, Nissan CEO Hiroto Saikawa said on Monday that too much power had been concentrated on the embattled official, and that the implications of his stewardship of both Renault and Nissan had gone unquestioned since 2005.