In a statement, Nissan said: "The investigation showed that over many years, both Ghosn and Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount in order to reduce the disclosed amount of Ghosn's compensation".
As well as being chairman of Nissan - which owns Britain's biggest vehicle plant in Sunderland - Mr Ghosn is also chairman and chief executive of Renault and chairman of Mitsubishi Motors.
The Yokohama-based company, one of the world's largest automakers, said the violations were discovered during an investigation over several months that was instigated by a whistleblower.
Prosecutors were moving toward arresting Mr Ghosn on Monday on suspicion of under-reporting his corporate salary, according to Japanese newspaper Asahi.
Mr Ghosn, a foreign top executive in Japan, has been credited in the past as having turned Nissan around from near bankruptcy.
A representative for the Tokyo prosecutors said they don't comment on individual cases.
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"Nissan's Chief Executive Officer Hiroto Saikawa will propose to the Nissan Board of Directors to promptly remove Ghosn from his positions as Chairman and Representative Director".
Ousting Ghosn, 64, is bound to raise questions about the future of the alliance that he personally shaped and had pledged to consolidate with a deeper tie-up, before eventually stepping back from its operational leadership.
Shares in Renault SA of France plunged 14 percent early Monday. "It is likely to have a negative impact on its brand image", he told AFP. The companies have worked as an alliance for nearly a two decades and Brazilian-born Mr Ghosn has led a dramatic turnaround at Nissan over the last two decades, rescuing it from near-bankruptcy.
In June, Renault shareholders approved Ghosn's 7.4 million euro ($8.45 million) compensation for 2017.
He became Renault's CEO in 2005, pressing for further streamlining through joint procurement and development under the Nissan-Renault alliance. But he was expected to remain chief executive of Renault and to continue in overall charge of the Alliance for the next few years.