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Ghosn case, Wirecard scandal… Beyond good governance, reform the government of the corporation

© Paul Fiedler / Unsplash

A Guest Commentary by François Valérian, Member of the International Board of Transparency International and of the Board of Transparency International France, Professor of Finance, Regulation and Supervision at Mines ParisTech and Associate Professor of Finance at Conservatoire National des Arts et Métiers¹

Summary: The international arrest warrant issued by France for Carlos Ghosn, the former automobile tycoon, reminds us of the Ghosn affair. Ghosn, Wirecard: twenty years after Enron and WorldCom, the big international corporations still need a true reform of how they are governed, beyond all the nice speeches about corporate governance.

France a few days ago issued an international arrest warrant for Carlos Ghosn, the once much praised and acclaimed French automobile tycoon, former CEO of both Renault and Nissan.

The warrant was issued over €15m in suspect payments between the Renault-Nissan alliance that Ghosn once headed and an Omani company, Suhail Bahwan Automobiles (SBA). The allegations involve misuse of company assets, money laundering and corruption².

Beyond the diverse offences that Ghosn allegedly committed, this latest episode in Ghosn’s judiciary saga invites us to reflect about use and abuse of power by some of those who are chosen to rule major international corporations.

Let us briefly recall the facts³. Renault-Nissan, one of the world's largest car manufacturers, with important bases in France, Japan, the United Kingdom and the United States, was to a large extent in its current shape a creation by Carlos Ghosn, who was successful at restructuring both the Japanese and French companies, also unfortunately at a high social cost.

On November 19, 2018, Carlos Ghosn arrives at Tokyo airport. The passport control employee tells him that there is a problem and that he must go to a room next door. Ghosn is impatient, his job is to grow an empire all over the world, not to waste time in airports, but he has to comply. The same night he is arrested on the orders of the Tokyo prosecutor’s office for having concealed $80 million in deferred income from investors between 2010 and 2018.

A year later, on December 29, 2019, Ghosn chooses to escape justice and finances for 7 million dollars, plus 13 million dollars of abandoned bail, his escape from Japan organized by a commando of mercenaries. He takes refuge in Lebanon. An escape, clearly, that not everyone can afford…

Within a few months after his arrest in November 2018, the carefully entertained image of a business and manufacturing genius fell apart under a series of charges brought by the Japanese prosecutors, followed by the US Securities Exchange Commission⁴ and the French prosecutors, as well as stories told by the media: partial concealment of an enormous $20m annual income that had to be fully disclosed under the post-financial crisis regulations, use of millions of Nissan dollars to cover losses during the 2008-2009 financial crisis, kickbacks allegedly received off $15m Nissan payments to an Oman-based car distributor owned by one of Ghosn’s billionaire friends, mansions bought in Rio and Beirut through Nissan, private travels paid by Renault-Nissan, as well as fastuous expenses such as those for Ghosn’s 2014 birthday party at France's Palace of Versailles.

As a result of the Ghosn affair, thirty thousand jobs destroyed worldwide

Ghosn was the CEO of both Renault and Nissan, with Renault owning 43% of Nissan. The Ghosn affair destroyed billions of dollars of shareholder value in both companies, and above all nearly thirty thousand jobs worldwide (15,000 at Renault⁵, 12,500 at Nissan⁶).

In 2019 Renault filed a complaint against Ghosn in Paris and in 2020 Nissan filed a complaint against him in Tokyo.

The question is obviously why the two companies waited until the fall of their CEO to file against him.

The answer seems simple: because he was the CEO and therefore nobody could act against him. But it is this simplicity of the answer that poses a problem.

For decades there has been talk of corporate social responsibility and good corporate governance. But these beautiful ideas are only empty words if ethics does not start in the CEO's office, and the very principle of ethics since Plato and Aristotle is to expose oneself to the contradiction of others: a CEO who is not contradicted by anyone is deeply unethical. While a number of human societies have evolved towards political organizations governed by a system of checks and balances, the government of many companies is still all too often a regime of unchecked monarchy. I am talking about corporate government, i.e. the way power is exercised within the company, and am purposedly not using the often blurred concept of governance. We sometimes talk about tone at the top. This however is not about hitting the right tone at the top of a pyramid, but about placing the top at the center of the company, surrounded by bodies that control and regulate it.

It is indeed the exercise of power that posed a problem at Renault-Nissan, it is an autocratic exercise of power that prevented any proceedings from being launched against Carlos Ghosn before Nissan whistleblowers handed over files to the Tokyo prosecutor’s office. Let us read what the authors of the report⁷ commissioned by Nissan since Ghosn’s arrest are saying.

Carlos Ghosn was “deified” within Nissan

"Based on the Special Committee Report, the Company believes that the primary root cause of the Misconduct was the concentration of all authority in Mr. Ghosn, including those regarding human affairs and compensation issues. Mr. Ghosn made the certain administrative departments which would be able to discover management misconduct opaque by concentrating authority in such departments in a few particular persons (…), and thereby created a situation in which it would be difficult to detect Mr. Ghosn's demands for his personal gain. As a result, the checks and balances function of certain administrative departments did not necessarily function effectively with respect to the problem concerning Mr. Ghosn's demands for his personal gain."

"In the context of his contributions to the reconstruction of Nissan, personality cult of Mr. Ghosn developed and then a tendency to regard his activities as an impenetrable territory was established in Nissan. (...) Mr. Ghosn realized the concentration of authority in himself by substantially gaining authority regarding human affairs and compensation issues".

"When the responsible persons were questioned by Statutory Auditors or Accounting Department regarding the issues with payment of compensation and the personal use of funds and expenses, they refused to provide detailed explanations, such as by simply responding that it was a "CEO matter".

"Mr. Ghosn requested the Board of Directors to complete its meetings as quickly as possible, thereby creating an atmosphere where it was not possible to ask questions about or give opinions on the agenda at the meetings.

"Until June 2018 when 2 Independent Outside Directors were newly appointed, the average duration of meetings of the Board of Directors was less than 20 minutes. Mr. Ghosn disliked having questions and/or opinions raised at meetings of the Board of Directors. He sometimes summoned Directors or Statutory Auditors who stated opinions etc. to his office after meetings and he did not reelect so-called "fastidious Statutory Auditors." One of the staff was told by Mr. Ghosn to look for Statutory Auditors who do not state opinions. Eventually, meetings of the Board of Directors were not an environment for robust debate.

"Mr. Ghosn was in a way deified within Nissan as a savior.”

One of the peaks of this Ghosn apotheosis was to be reached by Renault in 2015 when a glowing Vanity Fair article on Carlos Ghosn, presented as the world's most influential French person, was published on the group's global corporate website⁸, along with information for investors and the strategic plan.

Corporate fraud and corruption are very often made possible by the CEO's abuse of his or her power. Wirecard⁹, a German listed company specializing in digital payments, which was praised by the German business and global digital world for years, went bankrupt in the summer of 2020. The management would have falsified the accounts so much with false revenues that they presumably had to create €1.9 bn of false cash at hand in Philippine banks to account for the false profit generated. This grossly falsified balance sheet had allowed them to borrow real cash from banks which they had used, among other things, to have Wirecard purchase in 2015 an Indian business for €326m weeks after it changed hands for €37m, resulting in a huge profit for a middleman maybe linked to Wirecard managers.

24 bn of shareholder value was destroyed and nearly a thousand Wirecard employees lost their jobs.

The former CEO of Wirecard, Markus Braun, is in jail, now indicted on fraud and false accounts. The former COO, Jan Marsalek, had engaged in dealings so clean that apparently they brought him excellent friends: according to media releases he now lives in Moscow under the Russian secret service’s protection¹⁰.

The power wielded by the two men at Wirecard was also unbounded. As one former company executive put it, "Braun ran the company like a lord in his domain, as if it were his property. The members of the company's board ("Aufsichtsrat") had a strong financial interest in remaining on the board, which was largely dependent on Braun's goodwill. Their compensation varied between €200,000 and €300,000.

Braun and Marsalek's answer to the auditors, and in general to all those who questioned the reality of the accounts, was always "We are a high-tech company, don't ask us so many questions, everything is going so well!” Braun and Marsalek, like Ghosn, as long as they were successful, were not questioned by anyone. Similarly, Bernie Ebbers, CEO, and Scott Sullivan, CFO of the defunct WorldCom, exerted pressure on their staff that nothing could stop, using intimidation and belittling emails, or describing efforts to establish a corporate code of conduct as "a colossal waste of time” according to the 2003 SEC report of investigation. And Jeffrey Skilling, the CEO of Enron, was known internally as Darth Vader, the Star Wars character, or referred to as Machiavelli's Prince, The Prince being mandatory reading for a number of new recruits.

Enron went bankrupt in 2001, WorldCom in 2002. After the bankruptcy of these two giants, the Sarbanes-Oxley Act required a number of disclosures and increased transparency. After the 2008 crisis, largely related to the lack of control over bank executives and conflicts of interest between boards and executives, Dodd-Frank and several other regulations further strengthened transparency, disclosure requirements, even in some cases the CEO’s personal signature.

But now, after the Ghosn affair at Renault-Nissan, after Wirecard, what will we do? What else should be published? Isn't it time, beyond disclosure, to demand deeds?

Beyond disclosure, let us demand deeds and a reform of corporate government

It is clearly necessary now to intervene inside the company and not only on what it communicates to the shareholders or the outside world. The exercise of power must be reformed so that the company is no longer handed over to a charismatic boss, Skilling, Ebbers, Ghosn, Braun or Marsalek, bosses who, as long as they seem to be successful, are the object of a true cult and cannot be criticized by anyone.

Establishing ethics in the company means ensuring that an independent manager can express his or her disagreement with the CEO on compliance issues from the inside.

Internal audit functions have grown significantly in recent years, but a final step must be taken to create a really independent internal audit function. It is true that there is now external control by the board of directors' audit committee over the internal controls in place or the choice of external auditor, but the Wirecard affair has again shown that these developments have done little to improve the quality of controls.

As long as the person in charge of internal audit, the Chief Compliance Officer, depends on the CEO for his or her appointment or career, we will still have Ghosn cases, Wirecard cases, or other similar cases. About ten years ago I proposed¹¹ the establishment, in the main world stock exchanges, of a regulation requiring all listed companies to appoint the Chief Compliance Officer from the outside for five non-renewable years, with no possibility of remaining in the company afterwards. In this way we would create a population of competent and independent individuals who would have the power to control and investigate within the company. In the event of a disagreement between the CEO and the Chief Compliance Officer, the disagreement would be brought to the attention of the Board, which would decide.

The possibility offered to whistleblowers, whether inside or outside the company, to report wrongdoings also contributes greatly to the preservation or introduction of ethics in the company. A truly independent audit function would be the natural recipient of these ethical complaints, which all too often, for the time being, either cannot prosper internally, or go through external channels that are far away from the reality of the company.

One can easily imagine the resistance to this type of proposal. I do not claim that this is the only way to reform corporate government, but what I do believe is that without real reform of corporate government we will always go from scandal to scandal.

The argument of efficiency, which is often the same as that of Ghosn when he reduced Board meetings to twenty minutes, will be raised. To this objection, there are answers and decision-making processes, such as quickly referring disagreements between the CEO and the Chief Compliance Officer to the Board. But above all, how has Mr Ghosn's efficiency benefited Renault-Nissan? What are the economic, the social consequences of such a weak ethic?


1) I would like to thank my friend and colleague Laurence Cockcroft, a founding member of Transparency International, for his careful reading of a first version of this article and his always very valuable advice.

2) France issues international arrest warrant for Carlos Ghosn | Carlos Ghosn | The Guardian

3) Greimel (Hans) & Sposato (William), Collision Course. Carlos Ghosn and the Culture Wars that Upended an Auto Empire, 2021.

4) | SEC Charges Nissan, Former CEO, and Former Director with Fraudulently Concealing from Investors More than $140 Million of Compensation and Retirement Benefits

5) Renault va supprimer 15 000 emplois dans le monde, dont 4 600 en France - Le Point

6) Nissan to cut 12,500 jobs worldwide - BBC News

7) 200116-03-e_Improvement-Measures-Status-Report.pdf (

8) Carlos Ghosn voted “World’s most influential French person” by Vanity Fair - Renault Group

9) Holtermann (Felix), Geniale Betrüger : wie Wirecard Politik und Finanzsystem bloβstellt, 2021

10) „Bild“: Marsalek soll in Moskau gelebt haben - News - Neuigkeiten - Nachrichten - Information (

11) Valérian (François), Crisis in Governance. Business Ethics and the Race for Profit, 2011