Renault-Nissan has no plans for executive bonus plan, Ghosn says
Renault-Nissan has no current plans to introduce an additional bonus scheme for executives at the carmaking alliance, Chairman Carlos Ghosn said on Thursday.
Ghosn made the comments at Renault’s annual shareholder meeting after Reuters reported that alliance bankers had drawn up plans designed to channel millions of euros in additional, undisclosed bonuses to Ghosn and other managers via a specially created service company.
“This is the document of a consultant who came to make a certain number of proposals,” Ghosn said. “We are open to proposals, but that doesn’t mean when we listen to an idea that we are going to put it into practice.”
The bonus proposal has not been put to the Renault board or executive committee, Ghosn said during the meeting, adding that no decision was expected soon on the proposed scheme.
Ghosn, who has led Renault as CEO since 2005, and is chairman of Nissan and Mitsubishi, faces challenges on many fronts. These include:
• France’s new president, Emmanuel Macron is an old adversary of Ghosn. Macron’s government, which is Renault’s biggest shareholder, may seek to rein in the CEO
• France’s consumer fraud watchdog has told prosecutors that Ghosn should be held responsible if accusations of suspected diesel emissions cheating are proven
• Activist shareholders say Ghosn’s top alliance posts amount to a conflict of interest.
Against this, Renault’s group revenues rose by 13 percent in 2016 to 51.24 billion euros ($57.3 billion), and operating margin was 6.4 percent versus 5.2 percent in 2015. Earnings per share and dividends were both up.
Renault’s global vehicle sales increased by 13.3 percent, to nearly 3.2 million; in Europe the gain was nearly 12 percent. The Renault brand replaced Ford as the second largest in Europe by unit sales after the Volkswagen marque at No. 1.
The results may be more difficult to achieve in 2017, with the overall European market predicted to be well below 2016 figures. Renault has also fully consolidated its money-losing Russian subsidiary AvtoVAZ, which makes Lada cars, into its balance sheet. Ghosn has said he expects AvtoVAZ to be profitable by 2018.
Under the structure of the Renault-Nissan alliance, now 18 years old, Renault holds a 43 percent share in Nissan, while the Japanese carmaker holds 15 percent of Renault.
Ghosn’s compensation has been a contentious issue for years in France, where CEOs earn considerably less than their U.S. counterparts. He was awarded a total of 7.2 million euros by the Renault board of directors in 2015, although shareholders including the French state rejected that figure in a consultative vote.
In his previous post as France’s finance minister, Macron was critical of Ghosn’s CEO pay and also pushed the government to increase its stake in Renault to nearly 20 percent to give it more say in the automaker. Ghosn says any further integration of the alliance is off the table unless that share is sold.
Macron has criticized Renault’s “dysfunctional governance” and urged the company to reconsider Ghosn’s compensation. Ghosn also earned about $9.6 million last year as CEO of Nissan, a post he gave up in April while remaining Nissan chairman. He is poised to receive a third salary as chairman of Mitsubishi after Nissan acquired a 34 percent controlling interest in the Japanese automaker last year.
In response to the criticism, Renault’s board reduced Ghosn’s variable pay component by 20 percent and adjusted his bonus criteria.
The French press is reporting that the government will once again vote against Ghosn’s compensation and his base salary will remain at 1.23 million euros.
On Tuesday, Reuters reported that it had seen documents detailing plans by Renault-Nissan alliance bankers to channel millions of euros in additional, undisclosed bonuses to Ghosn and other managers via a specially created service company. The money would be a percentage of synergies achieved by alliance partners, expected to be more than 5.5 billion euros in 2018. Renault said no decision had been made and would not comment on “rumor or speculation.”
The report has ricocheted around the French press, with commentators noting Ghosn’s contentious relationship with Macron — and also that his contract as Renault CEO is up for renewal next year.
Ghosn may also face questions about a letter sent by activist investors to the French market watchdog asking for an investigation into the alliance’s governance structure. The letter claims that Renault failed to adequately inform shareholders about a transfer of decision making to Renault-Nissan BV, the Dutch-registered joint venture that oversees areas of alliance activities. It also suggested that Ghosn’s many posts within the alliance create conflicts of interest.
Ghosn, 63, may also be preparing for his succession at the alliance. Reuters reported last week that he is searching for a chief operations officer, a position that would supersede the separate chief competitiveness officer posts at Nissan and Renault.
Shareholders are also likely to demand answers about a French government investigation into diesel emissions, following on-road testing of European cars in the wake of the Volkswagen scandal in 2015.
French investigators are probing allegations that Renault used a “fraudulent” device that modified engine operation to reduce NOx emissions under specific testing conditions. Volkswagen and Fiat Chrysler are also facing the same judicial scrutiny in France. Ghosn has said repeatedly that Renault cars comply with European emissions regulations.