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Renault-Nissan Considers Hidden Bonus Plan

Under the preliminary proposal, Renault, Nissan and Mitsubishi would pay the Dutch-registered company a share of new synergies from their carmaking alliance, set to top 5.5 billion euros ($6.2 billion) next year.

Renault-Nissan alliance bankers have drawn up plans designed to channel millions of euros in additional, undisclosed bonuses to Chairman Carlos Ghosn and other managers via a specially created service company, according to documents seen by Reuters.

Under the preliminary proposal, Renault, Nissan and Mitsubishi would pay the Dutch-registered company a share of new synergies from their carmaking alliance, set to top 5.5 billion euros ($6.2 billion) next year.

The funds would be passed on as cash and stock bonuses to "encourage executives to pursue synergy opportunities", according to a presentation by Ardea Partners, an investment banking firm advising Ghosn on closer alliance integration.

Renault-Nissan declined to comment on the incentive plan or its chances of adoption. Spokeswoman Catherine Loubier did not respond to detailed questions from Reuters about the proposal and the relationship with Ardea, which also declined to comment.

Brazilian-born Ghosn, 63, is in open conflict with the French state, Renault's biggest shareholder, whose opposition to his CEO pay package was instrumental to its symbolic rejection in a non-binding vote at last year's shareholder meeting. His combined 15.6 million euros in Renault-Nissan pay amounted to the third-biggest haul among French CAC 40 company bosses.

In response, Renault cut Ghosn's variable pay component by 20 percent and clarified bonus criteria. Shareholders will have their say again at the 2017 general meeting on Thursday, in a vote that has now become binding under French law.

Ghosn, who is also chairman of Renault, Nissan, Mitsubishi Motors and the Renault-Nissan BV alliance management organisation, said in February the government's near-20 percent Renault stake was blocking a full tie-up.

The alliance bonus plan would seek to encourage Renault and its 44 percent-owned partner Nissan to operate more like a merged company without the need for actual ownership changes.

It would create a new pool of executive pay - on top of existing bonus plans at the allied carmakers and Mitsubishi, in which Nissan took a controlling 34 percent stake last year.

If implemented, the plan would likely draw criticism from some investors already concerned about compensation, governance issues and an ongoing French criminal probe into allegations of systematic Renault diesel emissions fraud. The company has denied any wrongdoing.


Under the proposal seen by Reuters, the carmakers would pay in 8 percent of each annual increase in synergies achieved. In a hypothetical year where new projects with Mitsubishi saved 1 billion euros, 80 million would be added to the bonus pot.

One-third of total awards would be reserved for the six top alliance roles - the chairman and CEO at each carmaker - of which four are currently occupied by Ghosn.

The new Dutch private limited company, or BV, would be wholly owned by an independent foundation, the presentation states, "avoiding related-party issues" that would require compensation to be disclosed to the manufacturers' shareholders. It would also escape French payroll taxes.

"The amounts paid through the service contracts would be disclosed each year in the respective accounts of the (alliance) members - although the amounts paid to each participant would not have to be legally disclosed," it says.

The incentive plan has Ghosn's backing, according to an accompanying memo dating from early June. "The scheme is still being worked out in detail," it says. Renault and Nissan are due to update mid-term plans and integration goals later this year.

London-based Ardea Partners was founded last year by Christopher Cole, a former Goldman Sachs banker who is close to Ghosn, as a private investment banking firm providing "strategic and financial advice to CEOs, founders and boards of directors of leading global enterprises facing complex challenges".

In 2013, Cole and his Goldman teams worked on a full Renault-Nissan deal study piloted by Ghosn and a group of alliance managers, known internally as Project Caterpillar. It recommended a merger, but Ghosn instead unveiled a purely operational integration push early the following year.

"It's an Ardea Partners-wide policy to never speak to the press," Managing Director Robert Falzon said when contacted for this story. "Our chairman is very focused on this."


The plan to reward cooperation may indicate that Ghosn sees little chance of a merger to cement the alliance he built and has run for 12 years, as he moves to hand over some powers.

In April, Ghosn stepped aside as Nissan CEO, though he continues to oversee operations as chairman.

Renault-Nissan is recruiting a new second-in-command, with several alliance managers in contention, Reuters reported on June 7. Senior Toyota executive Didier Leroy is also being considered, sources said this week.

Furthermore, the bonus plan would increase pay for the chairman roles from which Ghosn is expected to continue directing alliance strategy for years, whether or not his Renault CEO contract is renewed in 2018.

"It makes perfect sense," said one senior Paris investment banker when told about the proposal. "The question is whether he can manage the storm this is going to create."

Pressure on Ghosn over pay had been easing ahead of Thursday's (15 June) shareholder meeting, following the Renault pay concessions and his exit from the Nissan CEO role.

ISS, an influential shareholder adviser that opposed Ghosn's pay last year, is urging clients to back his package, which may be enough to overcome the usual government opposition.

($1 = 0.8911 euros)