Olympus EX-CEO ends bid to return
Briton who revealed fraud says he will sue for unfair dismissal
TOKYO // The ousted British chief executive of Olympus has dropped his bid to resume his leadership of the company, blaming cosy ties between its management and big Japanese shareholders and saying the saga had taken its toll on his family. Michael Woodford’s campaign against Olympus’s management rocked the once-proud maker of endoscopes and cameras but failed to win over Japanese institutional shareholders including Olympus’s main lenders, who support a board that has been castigated for insufficient oversight. After he was fired, Mr Woodford blew the whistle on a US$ 1.7 billion ( Dh6.24bn) accounting fraud at the company.
“Despite one of the biggest scandals in history, the Japanese institutional shareholders have not spoken one single word of criticism, in complete and utter contrast with the overseas shareholders who were demanding accountability,” Mr Woodford told a news conference in Tokyo yesterday. The decision by Mr Woodford, who was fired in October after just two weeks as chief executive, leaves foreign shareholders who want a new slate of directors without a champion to lead any proxy battle when the company convenes an extraordinary shareholders meeting as early as March. Mr Woodford said he would sue Olympus for unfair dismissal and had instructed his lawyers to begin legal action in Britain. Olympus said in October it fired Mr Woodford because he failed to understand the company’s management style and Japanese culture.
“There are no grounds whatsoever for dismissal,” he said. Mr Woodford, looking calmer than at his last news conference in Japan, where he had lashed out at Olympus executives and big Japanese shareholders, called his sacking and later developments an “Alice in Wonderland” situation.
“I get fired … for doing the right thing, and they [current management] are still there,” he said. Mr Woodford, who fled to England after his sacking, citing safety concerns, said the trauma suffered by his wife after he went public with his campaign played a major part in his decision to drop his bid to return to Olympus.
“It’s been a frightening period for my wife. I cannot put her through any more anguish,” he said in a statement explaining why he was ending his battle to be reinstated.
Olympus is being investigated by Japanese police, prosecutors and regulators and by US and British authorities over the scandal, in which the firm used mergers-and-acquisitions deals to hide investment loss- es stretching back over two decades. Mr Woodford said he would meet next week with the UK Serious Fraud Office. The scandal revived concerns about lax corporate governance in Japan and sparked speculation that crime syndicates were involved in the Olympus cover-up.
An external panel appointed by the company to investigate the scandal last month issued a scathing rebuke of core management but found no evidence that gangsters were involved. The company’s main lender and major shareholder, Sumitomo Mitsui Financial Group (SMFG), is backing the existing management, led by Shuichi Takayama, the chief executive. The management is seeking a capital tie-up with a rival firm to bolster Olympus’s finances.
Olympus’s net assets are dangerously thin after it corrected its accounts to include the effects of the 13-year accounting fraud.
Shareholder equity was just ¥42.9 billion ( Dh2.04bn) at the end of September, or 4.5 per cent of total assets – less than a quarter of what is seen as a healthy minimum. A 20 per cent proportion of equity would imply that Olympus needs to raise about ¥150bn of fresh equity.
Japanese media have reported that Sony, Fujifilm Holdings and Panasonic are among those that may ride to the rescue of Olympus.
Japan’s big banks such as SMFG and Mitsubishi UFJ Financial Group are often cornerstone investors in Japanese blue chips, with major equity and debt holdings. That puts them in a powerful position to influence board decisions.
In a sign that lenders are in the driving seat at Olympus, the company appointed the industrialist Shiro Hiruta, who has connections to the lender SMFG, as the head of an outside panel to advise the company on a management shake-up.
SMFG, which declined a request from Mr Woodford for a meeting, holds a 3.4 per cent equity stake in Olympus as well as ¥ 227.5bn of loans and bonds, according to company data and sources.