TOKYO -- Nissan is set to adopt a new governance structure aimed at preventing the pitfalls of concentrating power in the hands of a single executive.
The shock arrest of former Nissan Chairman Carlos Ghosn for financial crimes in November spurred the automaker to set up an external panel to review its corporate governance. The committee's seven members will issue their findings late Wednesday, which coincides with the 20th anniversary of Nissan's alliance with Renault that brought Ghosn to Nissan.
"Nissan didn't have any committees whatsoever, it was just Carlos Ghosn deciding it," said Zuhair Khan, an analyst at Jefferies in Tokyo. "There needs to be a clear feeling that what is done is correct, and it has to be evaluated by people who have no conflict of interest."
As chairman of Renault, Nissan and Mitsubishi, Ghosn enjoyed unprecedented power. Prosecutors say he used his position to falsify financial information and boost his compensation -- charges he has denied. He is free on bail and preparing for a trial that may begin later this year.
Now, as tension between the partners eases, Nissan has gained more independence.
Overshadowing the panel's announcement was a report by the Financial Times that Renault is seeking to merge with Nissan within a year, so that they can bid for Fiat Chrysler Automobiles. Fiat Chrysler itself is seeking a partnership or merger, and Chairman John Elkann has met with other rivals, including France's PSA Group to gauge the possibility of a deal, the newspaper reported Wednesday, citing unidentified sources.
The panel will say that Nissan's current management should also shoulder some of the responsibility for weak oversight that led to Ghosn's abuse of power, people with knowledge of the matter said on Wednesday. Their recommendations could change if they' are revised at the last minute, said the people, asking not to be identified because the information is not public.
Once Nissan's board accepts the measures, it will have a governance structure that calls for decision-making based on consensus instead of the whim of one person. Among the panel's proposals may be a recommendation to create separate governance committees to oversee nomination, audit and remuneration, with the majority of each body made up by independent directors, a person with knowledge of the proposals has said.
The proposals discussed Wednesday also may include the appointment of an external director to head Nissan's board, the person has said.
The vacuum in Nissan's governance created by Ghosn's exit was becoming a hindrance for the world's biggest auto alliance, with decision-making snarled until Nissan establishes a new structure, S&P Global Ratings credit analyst Margaux Pery wrote in a report last week.
Renault Chairman Jean-Dominique Senard also will chair the alliance board, which was reformed this month.
While the biggest source of tension -- the ownership imbalance -- remains, it is solvable, said Motoki Yanase, an analyst at Moody's Japan. Renault now has 43 percent in Nissan, which owns 15 percent of the French company. The French government is Renault's most powerful shareholder.
Detente is necessary because of the alliance's value to both companies and third partner Mitsubishi Motors. The scale and savings it brings outweighs the distrust that intensified with Ghosn's arrest, especially as the automakers face massive investment requirements in electric and self-driving vehicles, and renewed competition from Tesla and Uber.
"Nissan and Renault kissed and made up," said Janet Lewis, an analyst at Macquarie Capital Securities (Japan). "More than anything, it helps the employees stay focused on what they are doing."
The beginning of the alliance
The alliance was formed in 1999 after Renault agreed to salvage struggling Nissan, acquiring a major stake in the Japanese company in the process. More recently, Nissan's growth has outpaced that of Renault, resulting in calls from within the Japanese company for a more balanced partnership structure. Mitsubishi joined in 2016. Put together, the alliance sold 10.8 million cars last year, an eighth of total global auto sales.
Questions about the future of the union burst into the open after Ghosn's arrest four months ago for underreporting pay and breach of trust. The executive was preparing to push for a full merger and was facing resistance from factions within Nissan, including from protege-turned-accuser Hiroto Saikawa, who has been CEO since 2017. While Nissan was swift to remove Ghosn as its chairman, Renault took more than two months to appoint a new CEO and a new chairman.
Even with a more independent Nissan, the alliance will have to integrate more to compete. Renault and Nissan cooperate on technologies, manufacturing, supply-chain management, purchasing and human resources. The companies have cross-production activities in France, Spain, Portugal, Romania, Slovenia, Mexico, Brazil, Chile, India, Russia, South Korea and Japan.
The alliance has helped Renault and Nissan share expenses, and together the companies bring more heft to the table when negotiating purchasing terms with suppliers. They also benefit from each other's geographic footprint: Renault is stronger in Europe, while Nissan provides links to China, where Renault only has a small presence.
"Without proper governance the alliance cannot be something stable and sustainable," Khan said. "The transformation that's going to happen in the automotive industry in the next few years is going to be a transformation that we haven't seen in decades."
