If you’re wondering why Nissan CEO Carlos Ghosn is in jail, here’s how I understand it.

If you’re a car guy like I am you’ve probably come across news how Nissan’s former chairman Carlos Ghosn is in jail. Keep in mind that this is an unofficial understanding, I’ve read a couple of articles so you don’t have to, and I’m probably not the best summarizer of information. But, if you want a quick explanation, here’s how I understand it.

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Imagine you have one brother or sister getting paid an allowance every week to do chores. Also, imagine that your allowance stays somewhat the same for years. You get paid $10 a week and you assume your sibling gets paid the same. One day you look in your sibling’s wallet and find out he has hundreds of dollars. How can this be? You do the same chores more or less but you don’t have that much extra money, yourself. You then find out that your sibling is getting paid around $21 a week. That’s totally unfair. So, what do you do? You find out why, how, and complain to your parents. That explanation doesn’t quite summarize Carlos Ghosn’s situation and there are several holes in that analogy like what exactly is that kid doing to earn that much more over you but bear with me.

That’s the pay discrepancy that was uncovered by Nissan executives and number crunchers within the company in regards to Carlos Ghosn who was supposedly a partner with their other CEO’s.

Nissan’s current CEO Hiroto Saikawa makes around $3.6M annually now. According to Yahoo Finance on their latest discovering earlier this week (Jan. 13,2019) Carlos Ghosn was getting paid upwards of $8M annualy paid through a non-Japanese entity co-owned by Nissan and Mitsubishi. Ghosn made sure that he could receive payments through this entity without board approval. Ghosn is on record saying that he earns the same, if not less than his peers.

It’s a very simple reason why CEO’s underreport and hide their true earnings, they don’t want to get taxed on it. Financial Times reports that Japan, as of late, has increased taxes on heavy earners, Ghosn included.

As an aside, Nissan was very close to bankruptcy and was headed for insolvency back around the turn of the millennium. Carlos Ghosn spearheaded Nissan’s revival and turned the company around. Perhaps Ghosn felt that not only did he deserve a significantly higher pay but it was his right. After all, Ghosn singlehandedly saved Nissan.

But rules are rules, you can’t hide secret earnings, and you’re going to face the full force of the law. Since his arrest, Carlos’s wife, Carole, claims that Carlos is being treated unfairly in inhumane conditions and, in contrast to the American system of law, hasn’t been allowed to speak to a lawyer. Carole herself is also on record for being part of a purchase of $74,000 chandeliers bought with Nissan money.

As of this writing, the WSJ reports that Carlos Ghosn was denied bail, still says he’s innocent and denies all charges against him. As mentioned, recent evidence points to the contrary on those last two statements.

Perhaps the Japanese court system has some bugs that need to be worked out but the general consensus is there are no human rights violations and they’re doing everything to the letter of the law.

My opinion is that Carlos Ghosn and his family afforded themselves a lifestyle that they’ve gotten used to over the years, one that necessitated an extra $4M or so above their regular salary. Carlos Ghosn is a brillian strategeist, manager, leader, and can turn a company around, no question about that. But, when it comes to personal money, I wouldn’t put it past him if he wanted to keep a bit for himself despite what he’s getting paid.

Source: WSJ


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