Carlos Ghosn, who reigned over Nissan Motor Co. for nearly two decades after reviving the major automaker and led the Nissan-Renault-Mitsubishi Motors global automobile alliance, has been arrested on suspicion that he underreported his executive income by roughly ¥5 billion over five years. If true, the alleged misconduct — reportedly exposed by a whistleblower — is unjustifiable despite his achievements in Nissan's turnaround. Nissan called the suspected wrongdoing a "negative aspect" of the prolonged concentration of power within the automaker in Ghosn. But if so, it represents a corporate governance failure on the part of Nissan to have allowed it to happen for so long.

The law on financial instruments and exchange requires companies to disclose their financial state in annual reports to help investors make rational judgments, and since fiscal 2009 listed companies have been obliged to disclose the amount of compensation for each of their executives who earn ¥100 million or more. The fact that any violation of the law is punishable by a prison term of up to 10 years and/or a fine of up to ¥10 million indicates the gravity of the offense.

Ghosn is alleged to have colluded with another Nissan executive to file reports saying he earned a total of some ¥4.98 billion at the automaker over the five years to March 2015 — even though he in fact received ¥9.98 billion from the company over the period. Nissan, which said it is cooperating with the prosecutors' investigation and is reported to have reached a plea bargain with the investigators, will hold a board meeting later this week to remove Ghosn as chairman. Nissan President Hiroto Saikawa said an in-house probe has also unearthed other misconduct by Ghosn, including the private misuse of company funds, indicating the firm will consider criminal complaints or a damage suit against him.