The biggest focus of the alleged underreporting of executive remuneration by former Nissan Motor Co. Chairman Carlos Ghosn is whether the unreported portion was confirmed for payment to him in the future.
Ghosn was indicted on Dec. 10 on charges of violating the Financial Instruments and Exchange Act by underreporting his pay, which was actually some 10 billion yen over a five-year period up to fiscal 2014, as about 5 billion yen in the financial statements submitted to authorities. He arranged to receive the unreported portion after his retirement, according to prosecutors.
The former Nissan chairman was also served a fresh arrest warrant the same day on suspicion of underreporting an additional 4 billion yen over a three-year period until fiscal 2017. In total, Ghosn allegedly hid some 9 billion yen in his remuneration.
Corporate executives are supposed to receive payments based on their companies' performance and other factors. Their listings in financial statements are necessary for investors to judge those companies' policies and management. Facilitating this judgment is one of the reasons behind the decision by the government to obligate executives to list their names and salaries when the amounts reach 100 million yen or more.
False statements may cause investors to make wrong decisions. They are ethically unacceptable behavior.
Yet the entire picture of this case is not that simple.
Ghosn made documents listing the amounts he was going to receive after retirement every year, and shared them with his close aides while asking them to keep mum on the matter. These documents and testimonies from aides who struck plea bargain agreements with prosecutors are deemed as important pieces of evidence supporting the underreporting allegation, according to the special investigation unit of the Tokyo District Public Prosecutors Office.
Ghosn acknowledged that he planned to receive part of the allegedly unreported amount after his retirement, but he said the amount was what he hoped for and was not finalized. He also pointed out that the amount was not actually set aside for future payment.
Meanwhile, this case has triggered criticism against Japan's criminal prosecution procedures such as the duration of Ghosn's detention, from other countries including France.
The duration for the detention of criminal suspects varies from country to country depending on their respective judicial systems, and Japan cannot be said to have a longer detention period compared to other countries. Yet there are standard practices in other advanced countries, such as the attendance of lawyers during the interrogation of suspects, that are not generally accepted in Japan. We should continuously review our criminal prosecution procedures in response to the ongoing internationalization of Japan.