TOKYO (THE YOMIURI SHIMBUN/ASIA NEWS NETWORK) - It was the least-expected fall of a charismatic corporate manager.
It can be said that the future prospects of the world's second-largest automotive group have become ever more unclear.
The special investigation squad of the Tokyo District Public Prosecutors Office has arrested Nissan Motor Co.'s Representative Director and Chairman Carlos Ghosn on suspicion of violating the Financial Instruments and Exchange Law, by falsifying the company's securities reports.
Ghosn is suspected to have understated his remuneration as a director, by entering, in the company's securities reports, only half the amount he actually received.
Although he received pay totaling ¥9.998 billion (S$121 million) over five years from the business year ending in March 2011, securities reports stated that his pay over the period was only ¥4.987 billion.
A securities report, which states the business performance of a company and its financial condition, serves as an important resource for investors to make judgments about the company.
The statutory penalty for falsifying a securities report is a prison sentence of up to 10 years, or a fine of up to ¥10 million.
There is also a joint punishment provision to make a corporation involved punishable, as well.
If the allegations are proven, it would constitute a grave breach of investors' trust.
Some shareholders were uneasy with the large payment given to Ghosn.
Were these irregularities committed to dodge such criticism?
Greg Kelly, representative director and Ghosn's closest aide, was also arrested on the same suspicion.
Kelly had reportedly ordered other representative board members to conceal part of Ghosn's remuneration.
Ordinarily, the drawing up of securities reports involves people in a large number of posts.
Therefore it is deemed natural to consider that at least some senior officials were aware of the amount paid to Ghosn.
The responsibility of successive executives who have overlooked these irregularities, with Nissan's internal checkup failing to function, is grave.
Nissan must explain properly by doing its utmost to investigate the matter.
The special investigation squad in this case reportedly agreed to make plea bargain deals with Nissan executives and others suspected of having been involved in the falsification.
These executives and others involved may have their criminal punishments lessened in return for cooperating with the prosecutors' investigation.
Yet it also appears somewhat questionable if these officials, despite their having been involved in the falsification, are to be treated favourably.
There is also a problem of how the difference - as much as ¥5 billion - between the remuneration entered in the reports and the actual payment was raised.
The special investigation squad should, in cooperation with the national tax authorities, elucidate the unclear flow of the money.
In 1999, Ghosn was sent to financially troubled Nissan from France's Renault SA, which had formed a business tie-up with the Japanese carmaker, and he compiled the "Nissan Revival Plan," aiming to rebuild Nissan's business management.
He shut down Nissan's Murayama Plant in Tokyo, one of its main assembly plants, and carried out large-scale restructuring measures, including a reduction of about 18,000 employees - an endeavour that resulted in a ¥1 trillion reduction in costs.
He has been referred to as a "cost-cutter."
In 2000, Ghosn was installed as Nissan president, and he soon achieved a V-shaped recovery for the carmaker's business performance.
In 2005, he was also named Renault president to concurrently lead the two companies, and in 2016, he took the lead in realigning carmakers, a move that placed Mitsubishi Motors Corp. under the umbrella of Nissan.
It is safe to say that the excessive centralisation of power in the hands of Ghosn set the stage for his misconduct.
"(The latest affair) must be described as a negative aspect of Ghosn's longtime rule," Nissan President Hiroto Saikawa said at a press conference.
The acceptance of plea bargaining by Nissan executive officers seems to have reflected their judgment that the misconduct would not be tolerated much longer.
According to Nissan, other serious misconduct has also been found, such as the misappropriation of investment money and corporate expenses for personal purposes, in addition to the false financial statements.
If these accusations are found to be true, it can be described as exploitation of the carmaker for personal benefit.
Ghosn's arrest has disappointed investors, and Nissan's stock price sharply dropped Tuesday.
At Nissan, it has also come to light that unlicensed employees were engaged in inspecting products, and that fuel efficiency and exhaust gas data were falsified.
Nissan must strive to improve its organisation through such means as repairing its corporate governance, so it can hasten to restore trust.
Saikawa has expressed his wish to maintain the Nissan-Renault-Mitsubishi alliance.
He also emphasised, "(The latest affair) is, by nature, not a case that will affect (the three-way relationship) at all."
Is he correct in saying so? There is a possibility that the exit of Ghosn, who has held the top positions of the three companies, would lead to the differences in these firms' strategies surfacing, a situation that could shake their cooperation.
Renault has a stake of about 44 per cent in Nissan.
On the other hand, Nissan's sales figures exceed those of Renault, showing that Nissan underpins Renault's earnings.
There was growing dissatisfaction and resentment within Nissan over the attitude taken by Ghosn and Renault in attempting to increase their involvement in the Japanese carmaker.
One task to be tackled in maintaining the alliance is bringing an end to such discord.
The automobile industry faces a once-in-a-century period of reform, such as progress in self-driving technology and the spread of electric-powered cars.
To survive competition in the world, carmakers must cement their management structures.
They should take this to heart.
The Yomiuri Shimbun is a member of The Straits Times media partner Asia News Network, an alliance of 23 news media organisations.