Who the hell is Carlos Ghosn and what did he allegedly do? World Economic Forum from Cologny, SwitzerlandCC by SA 2.0

Carlos Ghosn has been arrested in Japan, we expect him to get fired on Thursday from Nissan and associated companies so, what the hell just happened here? We rather need some nice and simple explanation for us dullards out here. Exact allegations, well, go plough through whatever it is that Nissan is releasing. Roughly though he’s accused of lying about how much he was paid. Lying to the stock market and thus investors that is. He’s not alleged – so far – to have been stealing money. It’s not skimming the cash float in order to boost his pay, it’s not reporting what he was paying tax upon, the company was sending him.

Yes, a bit complex, but that’s the gist of it:

Carlos Ghosn, the joint chairman of Renault-Nissan, has been arrested in Japan on suspicion of falsifying financial statements and is due to be removed from his position by the board on Thursday for allegedly “masterminding” a fraud together with one of his senior advisers.

Mr Ghosn is chairman of the Renault-Nissan alliance as well as chief executive and chairman of Renault. The companies have worked as an alliance for almost two decades, adding Mitsubishi to the fold last year, of which Mr Ghosn is also chairman. The Brazilian-born Frenchman has led a dramatic turnaround at Nissan over the last two decades, rescuing it from near-bankruptcy.

But he was arrested on Monday in Tokyo by prosecutors…

Falsifying financial statements. Elsewhere we’re told that he was being paid tens of millions and yet the stock exchange was being told that it was less than that, perhaps half of that. Yes, misleading an exchange, thus investors, is a crime and should be one. But why? Why do this?

Now I must move off into the world of pure speculation. This is from a universe which isn’t exactly ours in fact. Entirely made up even. But Japanese executives are, by international standards, remarkably low paid. Indeed people do remark on it, why should those Anglo execs get paid so much when the Japanese don’t pay captains of industry 300 times what the average worker gets? The answer being that Nippon execs get paid in something else, social approbation. The grand fromage of a Japanese firm is royalty. Compensation for his position is, within that society, just as high as for similar talent elsewhere, it’s just distributed differently.

But if you’re a foreigner running a Japanese company then that cultural approbation inside Japanese society isn’t of all that much value to you. So, we can imagine some foreigner coming in and expecting something like those Anglo rewards – the weighting toward pure cash.

That then runs smack into that cultural problem. The company’s listed on the Japanese exchange. Yes, cultural expectations do matter. Paying that 300 x multiple simply won’t go down well. Paying 10x what other CEOs get won’t. So, what to do, how to balance these expectations?

Pay the cash and publicly report something more culturally appropriate.

No, of course not, this is not from our universe, not this reality. But it does fit Occam’s shaving kit despite it being pure invention.