In April this year, Michael Woodford became president of Olympus, a Japanese optical and medical equipment maker with a God-like reputation to match its name – until recently.
Last July, a small Japanese magazine called Facta published an article on Olympus’s spectacular money-losing investments. Another magazine,Zaiten, followed up with an expose on Olympus’s failed investment branch, ITX. This prompted Woodford to begin examining the company’s records. By 12 October, Woodford urged the company chairman, Tsuyoshi Kikukawa, to step down due to “serious governance concerns”. The response of the Olympus board was to strip Woodford of his executive position, while playing it to the Japanese media that he had been fired due to cultural clashes with management.
The Japanese mainstream press went with the cultural angle. But the foreign media – led by the Financial Times – began an assault on Olympus, strongly questioning its management decisions. When mainstream Japanese newspaper Sankei Shinbun ran an interview with Woodford in which he voiced his misgivings, the rest of the Japanese media began pursuing allegations of malfeasance as well.
By 26 October, with Olympus stock prices tanking, Kikukawa stepped down as chairman to become a director – while remaining on the board. The Tokyo stock exchange’s head lambasted the company shortly afterwards. Japan’s financial services agency began their own investigation, and the Japanese police began to look at whether Olympus executives could be charged with special breach of trust.
The series of mysterious transactions that have taken place at Olympus since 2006 would take pages to describe. To sum them up succinctly, between 2006-2008 the company is said to have bought three firms for ¥73.5bn, and wrote them down ¥55.5bn in 2009. In addition, the firm spent ¥210bn buying UK medical-instruments maker Gyrus Group in 2008, of which almost a third of the costs were paid to two mysterious financial advisory firms in the US and the Cayman Islands.
Most of the press coverage, except for that from the astute Hiroko Tabuchi at the New York Times, has been primarily focused on the dealings involving Gyrus, but a look at Olympus’s investments in the three supposedly unrelated companies – Altis, a waste disposal and recycling company, Humalabo, a nutritional supplement maker/facial cream seller and News Chef, a seller of microwave cooking ware and asset management firm – may be more revealing of core problems at the firm.
For the rest of the story, go to The Guardian