Business / Corporate

Documents show Ghosn's Renault lieutenant drew extra salary via holding; board unaware of payment

by Laurence Frost and Ritsuko Ando

Reuters

One of Renault boss Carlos Ghosn’s senior executives received an additional six-figure salary unknown to the carmaker’s board via the Dutch joint venture overseeing its alliance with Nissan, according to sources and documents seen by Reuters.

Ghosn and Nissan senior director Greg Kelly, who are at the center of a financial misconduct scandal engulfing the carmaking alliance, approved payments totalling €500,000 ($572,000) to Renault General Secretary Mouna Sepehri, who is responsible for corporate governance in her role as board secretary.

There is nothing to suggest that the payments by Renault-Nissan BV (RNBV) were illegal or violated Renault-Nissan rules, but they highlight governance issues and potential conflicts of interest.

Renault declined to comment directly on Sepehri’s RNBV pay as a board member of the Dutch holding company, which has not previously been reported. Sepehri did not respond to requests for comment.

“Individual compensation, while entirely justified, is not publicly disclosed, in accordance with the law,” a Renault spokesman said in an emailed statement. “Renault would be outraged by any publication of an identified executive’s pay, which constitutes personal information.”

Sepehri currently sits on the RNBV board with nine other Renault and Nissan executives, and is the only director who drew a compensation package directly from the subsidiary, according to the documents and a senior alliance executive.

She received €200,000 in 2013 and €100,000 annually from 2014 to 16 in addition to her Renault pay, according to statements addressed to her each year and the minutes of a 2013 meeting at which Ghosn and Kelly ordered the payments “for the performance of her duties as a management board member.”

“It’s important as a general rule that board secretaries avoid allowing themselves to be influenced by a CEO who might promise them remuneration through a subsidiary,” said Loic Dessaint, head of Proxinvest, a prominent shareholder advisory firm based in Paris.

“If Ms. Sepehri has been paid by RNBV, it is a conflict of interest situation,” Dessaint said. “At a minimum, Renault directors should have known about it.”

Ghosn and Kelly have been charged in Japan with failing to disclose ¥5 billion in additional compensation for 2010 to 2015 that Ghosn had arranged to be paid later. They deny that the deferred compensation agreements were illegal or required disclosure.

The finances of RNBV and other alliance subsidiaries are under scrutiny in the Nissan investigation that led to Ghosn’s November arrest and ouster as the Japanese carmaker’s chairman.

The French government, Renault’s biggest shareholder, has also demanded that the carmaker provide information about RNBV payments to its executives.

Sepehri is among a small group of alliance executives who have previously attempted to find legal ways to pay Ghosn undisclosed income through RNBV or other shared finances, it was reported on Dec. 19.

In 2010, she and Kelly worked on proposals to create an additional source of CEO compensation through RNBV, but later dropped the plan after concluding it would not avoid French legal disclosure requirements.

She and a handful of top managers were also involved in a 2017 project to pay out millions of euros in undisclosed bonuses via a new Dutch service company. The plan, of which Ghosn was the main beneficiary, was scrapped after Reuters revealed its existence in June of the same year.

Both efforts, which Renault has confirmed, were designed explicitly to keep the company’s board and shareholders in the dark about significant compensation to the CEO, while working within the law and Renault-Nissan rules.

The scandal surrounding Ghosn and Kelly has strained Nissan’s ties with 43.4 percent-owner Renault — which has maintained Ghosn as chairman and CEO, with his deputy, Thierry Bollore, as an interim stand-in.

Members of the Renault board, which includes French state representatives, say they have yet to be given full access to Nissan investigation findings shared with company lawyers reporting to Sepehri.

Her role gives her control over communications, legal and public affairs, as well as the flow of information to the board.

The access restrictions are required for judicial confidentiality, Renault said. The carmaker dismissed questions about a potential conflict of interest for Sepehri.

“Ms. Sepehri occupies a typical general secretary function,” Renault said, adding that the company was “relying on the opinion of its lawyers and advisers” in dealing with the Nissan investigation findings.

Three years after joining the French carmaker as deputy legal director, Sepehri helped negotiate the 1999 acquisition of near-bankrupt Nissan, where Ghosn — then Renault’s second-in-command — led the lightning turnaround that made his name.

As their alliance deepened, Renault-Nissan BV was founded in 2002 as a jointly funded management organization.

France’s CGT union, which has a seat on Renault’s board, said recently it had contacted Finance Minister Bruno Le Maire to denounce RNBV’s “opaque workings,” citing payments to an executive it did not identify.

In response, in a Jan. 4 letter to Renault, the government demanded details of any undisclosed executive payments by the Dutch holding.

“I want to know who these payments were made to, whether they were disclosed, whether they correspond to work carried out and whether the Renault board and shareholders were informed about them,” Le Maire said on CNews television.

Ghosn and Kelly agreed on March 26, 2013, that RNBV would pay Sepehri €125,000 immediately, and monthly payments thereafter amounting to €100,000 per year, according to the minutes of their decision.

The two men were meeting as the RNBV board’s “governance, appointments and remuneration committee.” Its third member, Sepehri, had recused herself, the same document notes.

Four annual statements issued by RNBV confirm the subsequent payments, with a Dutch withholding tax deducted. While all RNBV directors were salaried Renault or Nissan managers, Sepehri was alone in receiving additional compensation for her board role.

In its response, Renault said RNBV’s board of directors — which also includes Ghosn, Bollore and Nissan CEO Hiroto Saikawa — was informed about members’ compensation.

“The RNBV management report, which is approved by the board and auditors, includes information about its executives’ pay,” the company said.

However, Sepehri’s fellow directors of unlisted RNBV were not told who received the €100,000 mentioned only as compensation to “board members,” according to a senior alliance executive who has seen the annual reports. He spoke on condition of anonymity.

“There was no official board decision on this compensation,” he said. Other alliance executives and RNBV directors declined to comment.

For Proxinvest, which advises large financial investors on how to vote at shareholder meetings, the RNBV board process also raises concerns.

“Good governance requires that a committee proposal should be approved by the full board,” CEO Dessaint said. “And the fact you have only one member receiving payment is very troubling.”