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The abrupt resignation Monday of Nissan CEO Hiroto Saikawa, after an internal investigation uncovered falsified documents that boosted his compensation, marks a dramatic shift in an ongoing scandal that broke open last November with the arrest of then-Chairman Carlos Ghosn.
Suddenly, Saikawa — who ordered the investigation into his former mentor — finds himself in the spotlight and standing accused of pocketing excess pay, too.
It also compounds the woes facing a company that appears to have done little in the past to monitor or rein in its top executives. And the lack of oversight comes to light at a time when Nissan's sales and earnings have taken a sharp tumble, forcing substantial cuts in production capacity and the elimination of thousands of jobs worldwide.
"With the scandal that already was circling the company, any further lack of credibility on the part of its leadership is completely unacceptable," said Eric Schiffer, CEO of Reputation Management Consultants. "What seemed like an individual case is now a pattern ... revealing a total lack of control by senior management and raising questions about the incompetence, or complicity, of the Nissan board. This requires a deeper, full-scale investigation."
For now, at least, "the investigation is complete," Nissan spokeswoman Azusa Momose told CNBC. But it has led to some changes.
The company revamped its corporate governance structure in June, adding new board committees, separating its oversight and executive functions and overhauling the board with more independent outside directors, Momose said in an email.
The internal probe has been underway for more than a year at Nissan, resulting in the arrests of 65-year-old Ghosn and former director Greg Kelly last November.
Prosecutors initially cited company data alleging the Brazilian-born executive had substantially underreported his income. Since then, they have ladled on a variety of additional charges while investigating other allegations. Reports published last month by The Wall Street Journal alleged Ghosn diverted millions through an ally in Oman that eventually landed in a Silicon Valley investment firm he ran with his son Anthony.
Overall, Nissan believes Ghosn and Kelly concealed more than $327 million in payments to themselves and other executives — $187 million in nondisclosed compensation and $140 million in improper expenditures, the company said in a five-page summary of its internal investigation Monday. That included about 96.5 million yen paid to Saikawa in 2013 after he complained about his pay, or roughly $900,000, based on current foreign exchange rates.
Nissan said it doesn't plan to punish or hold others who benefited from Kelly and Ghosn's alleged misconduct responsible for the overpayments. The company said there is "no reason to believe that any of the individuals were complicit in misconduct."
All along, Ghosn has proclaimed his innocence, even alleging he was set up as part of a "corporate coup." He hasn't been the only one questioning the motives and pointing a finger at Saikawa. Veteran auto analyst George Peterson, of AutoTrends Consulting, told CNBC he suspected the ouster of Ghosn was part of a plan to put some distance between Nissan and French alliance partner Renault.
The relationship has clearly soured since Ghosn's arrest, reaching a low point in May when objections by Saikawa and other senior Nissan executives helped scuttle a proposed merger between Renault and Fiat Chrysler.
Within Nissan, several current and former executives told CNBC, morale has sunk and there is an air of concern about the future.
Certainly, it hasn't helped that the automaker suffered a sharp downturn during the fiscal year that ended March 31, global sales dipping 4.3%, to 5.2 million vehicles, while earnings were off 57%, to 319 billion yen, or $2.9 billion.
The first quarter of fiscal 2020, which closed June 30, got off to an even worse start. Analysts had expected Nissan to deliver earnings of about $1.6 billion for the quarter. Instead, the numbers came in at a meager $58 million, or 6.4 billion yen, down by more than 94% from the year before.
That has forced Nissan management to order a downsizing program that will not only see it trim its model count and production capacity by 10% over the next three years, but also reduce its global workforce by 12,500.
"This is not a good time for [Nissan's financial scandals] to happen," said Stephanie Brinley, an analyst with IHS Markit. "All this turmoil, for sure, is a drag on the company. It's a distraction that makes it hard to move a lot of projects forward."
Analysts also worry the decision-making process at the top could wind up on hold. Saikawa's replacement, Chief Operating Officer Yasuhiro Yamauchi, is seen as temporary while the search for a permanent CEO gets underway.
Complicating matters, the ongoing corruption probe has, in the eyes of some observers, been used to diminish the role of the foreign executives who had come to take leading roles in the nearly 20 years since Renault bailed out a faltering Nissan in 1999.
Many found themselves under intense scrutiny. One former senior executive who had worked in Japan for a number of years warned of a possible "bloodbath" following the unexpected departure in January of Jose Munoz, one of the company's highest-ranking Westerners.
Munoz, who was Nissan's highly respected chief performance officer, told colleagues he decided to leave after "some period of serious contemplation," Automotive News reported at the time. He joined Hyundai Motor as its chief operating officer in May.
The departures continue, most recently with the August departure of Karim Habib, who had been serving as head of design for the high-line Infiniti division.
"Every time the company loses another one of these Western executives, it becomes harder and harder" to keep itself focused on the challenges it faces, said another former Nissan executive who had spent several years working in Japan.
One of the questions frequently raised by those watching Nissan is what happens next.
Junichiro Hironaka, one of Ghosn's defense lawyers, declared at a Tokyo news conference last week that "Nissan must have known about the improper payment to Saikawa when it conducted its in-house probe into Ghosn," according to reports in the Japanese press. "It turned a blind eye to Saikawa and only went after Ghosn," he added.
If anything, however, the probe wasn't as one-sided as the defense lawyer suggested, it now appears. And Saikawa is its latest target.
"Once you start looking into the books, you can't stop it," said a former Nissan executive who had served the company in Japan for a number of years.
Whether Saikawa will face the same legal problems as Ghosn is far from certain, he quickly cautioned, adding that "this will be determined by the regulators in Japan."
But there is little doubt that the latest twist to the corruption scandal will only complicate the challenges Nissan faces, including an investigation by the U.S. Securities and Exchange Commission disclosed by the company in January.
While Nissan officials confirmed that Saikawa was asked to resign by the board, the company declined to say whether it will ask Japanese prosecutors to now step in to the case.