TOKYO — The Nissan chairman, Carlos Ghosn, was arrested on Monday after an internal company investigation found that he had underreported his compensation to the Japanese financial authorities for several years.
Nissan said it was cooperating with Japanese prosecutors. It also said that it had opened its inquiry after a whistle-blower alleged that Mr. Ghosn had been misrepresenting his salary as well as using company assets for personal use. Both he and a director, Greg Kelly, who was also accused of misconduct, were taken in by authorities, the company said.
It is a remarkable tumble for Mr. Ghosn, who arrived at Nissan in 1999 after Renault, the French carmaker, bought a large stake in the Japanese company. It may prove to be an ignominious final chapter in the career of one of the most powerful and highly regarded executives in the automotive industry.
Earlier in the day, Nissan said in a statement that Mr. Ghosn and Mr. Kelly had been involved in misconduct and recommended that both be removed from their positions. Neither Mr. Ghosn nor Mr. Kelly could be reached for comment.
Mr. Kelly, who spent years working in Nissan’s human resources department, was appointed to the automaker’s board in 2012, the first American to hold the role.
According to Nissan’s securities filings, Mr. Ghosn was paid 735 million yen, about $6.5 million, in cash in 2017, down 33 percent from the ¥1.1 billion he was paid in 2016.
The disclosure raised questions about Mr. Ghosn’s role as chief executive of the Renault-Nissan-Mitsubishi Alliance. Although he stepped down from the top job at Nissan last year, Mr. Ghosn, 64, has remained at the top of the world’s largest automotive alliance and told reporters as recently as last month that he planned to stay in that post until 2020. Mr. Ghosn was paid ¥227 million in cash and stock options by Mitsubishi Motors last year.
Renault shares tumbled 10 percent on the Paris Stock Exchange, while Nissan shares in Düsseldorf, Germany, fell 9 percent.
“Nissan deeply apologizes for causing great concern to our shareholders and stakeholders,” the company said.
After he was sent to Japan by Renault, Mr. Ghosn was credited with saving Nissan from financial collapse. He made sweeping changes at the automaker, closing five domestic factories and cutting 21,000 jobs. He was widely celebrated as a powerful change agent in Japan: His life story was even made into a manga comic, although critics noted that he earned his French nickname, “Le cost killer.”
In insular Japan, where foreign leadership of Japanese companies is rare, Mr. Ghosn’s downfall could be taken as a referendum on the perils of working with outsiders. “He’s always the go-to when people say foreigners can never succeed in Japan,” said Pernille Rudlin, managing director of Rudlin Consulting, which specializes in intercultural consulting with Japanese companies. “Now there are no good examples left.”
Nissan had already stumbled of late. Last October, the company suspended production at all of its Japanese factories after discovering that uncertified technicians had conducted vehicle inspections. In July, the company admitted to falsifying emissions and fuel economy tests.
The disclosures about Mr. Ghosn’s misconduct is of another order, analysts said. “For Nissan, Mr. Ghosn is a big hero,” said Shin Ushijima, a lawyer who specializes in corporate governance. “This news is so embarrassing.”
Mr. Ushijima said that Mr. Ghosn had been treated as untouchable at Nissan and that the revelations suggested serious problems with the corporate culture and oversight by the board of directors.
“Such misconduct cannot be done by Mr. Ghosn alone,” said Mr. Ushijima. “His subordinates must have been involved. And I really wonder how well the outside independent board members watched Nissan.”
Mr. Ghosn is given credit for overcoming differences in corporate and national cultures that have often doomed megamergers of car companies, such as the ill-fated marriage between Daimler and Chrysler, which was dissolved in 2007.
The alliance of Renault, Nissan and Mitsubishi sold 10.6 million cars last year, more than Volkswagen, Toyota or General Motors. Based on sales in the first half of 2018, the alliance could sell 11 million cars this year.
Nissan and Renault own substantial stakes in each other, while Nissan owns 34 percent of Mitsubishi. Under Mr. Ghosn’s supervision, the companies retain their independence while sharing costs of developing new models and technologies, and purchasing components together.
Executive compensation has been a sticking point for Mr. Ghosn in France. He has been in a bitter fight over his salary with the Renault board and the French government, which owns a 15 percent stake in Renault.
Mr. Ghosn insisted on a pay package of 7.4 million euros, about $8.5 million, for 2017, stoking controversy among shareholders and Renault board members. The French government, which has been trying to improve the image of a divide between the nation’s wealthy executives and working people, had insisted that Mr. Ghosn’s compensation be more limited.
At a news conference with the Belgian prime minister on Monday, President Emmanuel Macron of France said it was too early to comment. But he added that the French state, as a major Renault shareholder, would be “extremely vigilant about the stability of the alliance” between Renault and Nissan.
As the company’s share price tumbled, Mr. Macron added that the French government would also seek to maintain stability and “full support” for Renault’s workers. The company employs more than 47,000 people in France.
Proxinvest, a Paris-based shareholder advisory firm, had also recommended voting against Mr. Ghosn’s 2017 salary, citing what it said was a lack of transparency over how the compensation was calculated as well as high bonuses.
Renault shareholders ultimately approved his 2017 payout. But Mr. Ghosn reluctantly agreed to cut his 2018 salary by 30 percent to secure the French government’s backing for another four-year term as chief executive.
A similar fight over Mr. Ghosn’s pay broke out in 2016, when Mr. Macron, who was France’s finance minister at the time, pressured Renault to rein in the chief executive’s pay. Shareholders ultimately voted against giving Mr. Ghosn a €7.2 million pay package for the previous year.
In Japan, Mr. Ghosn’s pay made him an outlier. Japanese executives typically earn far less than their American or European counterparts. Takeshi Uchiyamada, chairman of Toyota, for example, was paid ¥181 million in 2017, compared to Mr. Ghosn’s reported ¥735 million.
Foreign investors tend to criticize Japanese companies as not paying executives enough. “For the Japanese market, the main concern from foreign institutional investors is the question of whether compensation will be less incentive driven,” said Hideaki Miyajima, professor of commerce at Waseda University in Tokyo. “The criticism of Japanese firms is that compensation is not related to performance, and Japanese leaders are less likely to take risks.”