Briton Scales Heights of Olympus

[legion]

Kikukawa's missus was probably pleased to see the nice young men taking away all that sodai gomi

[2triky]

[Dreamy_Peach]

[IparryU]

It needs repeating:

might even become a famous quote...

[Ganma]

'Oil 'n pus' gets to second place in the evil company of the year award. Number one being TEPCO.

[legion]

Woodford is starting to sound like a petulant child.

He just cost the shareholders a lot of money and he expects them to support him. As far as they are concerned Olympus was just riding out some bad investments. If they'd been smart like Barclays Bank they would have stored them in a war chest and used them for tax write offs, but they weren't that good at the game, settling for basic window dressing instead.

I hope he flies home economy class.

[dimwit]

Whistleblowing is one thing, but shitting on the company that he is the only solution to their problems even loses my sympathy.

[Mulboyne]

...He just cost the shareholders a lot of money...

I've seen a few people make this claim. What cost the shareholders money, was the fact that the board made some disastrous investments which they then spent more money concealing. Woodford carries no blame for that and it is perverse to try to pin it on him.

Once the law changed requiring firms to disclose any such investments - after years of being tacitly permitted to carry them - Olympus was obliged to do as other companies did. When the board members decided instead to look for fraudulent means to avoid this outcome, they did not do so to protect shareholders, they wanted to save their company pensions, perks and reputations.

I don't care whether Woodford gets the top job or not. There's no rule saying he ought to get it because he was right and acted appropriately. I do care about the state of corporate governance when a board, which failed in its fiduciary duty, is permitted to continue as if it had done nothing wrong. We also learn from FACTA that the board has continued to authorize payments, including apartment rental, to the executives named by the third party investigation as being directly responsible for the debacle.

I'd feel happier if I knew that the entire board would be required to resign, and take no part in any decisions relating to recapitalization or future management appointments. The main reason this is not happening is that institutional shareholders have no plan B. They are perfectly entitled to turn Woodford down, possibly even right to do so. However, few of them know enough about Olympus and its industry to know who to turn to take over the reins. It's just easier to act as if there were only a few bad apples, maintain the status quo, and see what happens.

[Yokohammer]

A Japanese company has been openly shamed by a foreigner. Therefore the foreigner is bad.

That, rather than the fact that the company had engaged in unethical and illegal business practices, is what will stick in the minds of many Japanese, and the spin machine will do its best to assure that's the way it goes. It'll be oh-so easy to create that kind of response too, because it's what people want to believe, and it's so much easier on the national ego that way.

It's just a matter of slowly chipping away at reality until myth takes hold. Won't be the first time, and probably won't be the last. And I'm sure the local media will be fully cooperative.

[Coligny]

Woodford is starting to sound like a petulant child.

He just cost the shareholders a lot of money and he expects them to support him. As far as they are concerned Olympus was just riding out some bad investments. If they'd been smart like Barclays Bank they would have stored them in a war chest and used them for tax write offs, but they weren't that good at the game, settling for basic window dressing instead.

I hope he flies home economy class.

Youz sounds like if the only problem was the fact they got coughted...

Shareholders are not orphans deserving state protection...

They play a game, profit of the crime (olympus, tepco) and when they lose money, they fooking deserve it...

[Typhoon]

Youz sounds like if the only problem was the fact they got coughted...

Shareholders are not orphans deserving state protection...

They play a game, profit of the crime (olympus, tepco) and when they lose money, they fooking deserve it...

Quite right. Shareholders are, in principle, partial owners of the business and, as such, assume the risks.

What they are not are secured creditors.

[Guest]

A Japanese company has been openly shamed by a foreigner. Therefore the foreigner is bad.

That, rather than the fact that the company had engaged in unethical and illegal business practices, is what will stick in the minds of many Japanese, and the spin machine will do its best to assure that's the way it goes.

It is this way of thinking that is sinking all of Japan. Japanese people simply cannot opposed other Japanese people versus foreign people or pressure. They culturally cannot.

So, at the expense of all other businesses and business ventures in Japan, the status quo will be maintained at any cost while the rest of Japan suffers.

The foreign investigating teams are going to wipe the floor with Olympus and then move on to another Japanese corporate conglomerate. Tearing apart Japanese companies will become a new cash cow. Both directly and indirectly.

[legion]

I've seen a few people make this claim.

I'm not talking about rights and wrongs here I'm talking about perceptions, as far as the shareholders are concerned if he'd played along it would have all faded into the long and glorious history of dodgy accounting. Woodford did what was "right", but did he do it in the "right" way?

He's a salesman by trade, good salesmen are generally people who ascribe failure to anything but themselves. It's a good trait to have in business, protects self image and confidence, however the downside is an inability to see alternative approaches might also work.

I'm not saying Olympus was A-OK, but I am saying he is a bit of a wally if he thinks institutional share holders, who probably have plenty of dirty laundry themselves are going to welcome him back with open arms.

[Mulboyne]

I'm not talking about rights and wrongs here I'm talking about perceptions, as far as the shareholders are concerned if he'd played along it would have all faded into the long and glorious history of dodgy accounting.

The shareholders don't hold it against Woodford that he lifted the covers on Olympus. Rather, they are embarrassed that they didn't know what was going on when it is their own fiduciary duty to monitor their investments: especially longstanding holdings.

The worst thing Woodford did was to force them to have an opinion when they aren't in a position to formulate one. For foreign investors, the easy conclusion is that the current management is incompetent and must be replaced. Japanese investors know that the current board was wrong but, asked to choose a potential loose cannon like Woodford, they declined to go that route.

In their own minds, they aren't supporting the current board, they just believe that Woodford will not best serve their interests. However, because they do not have any other managers in mind, by default, they are supporting the incumbents. Faced with the option to make an active decision or a passive decision, the shareholders have gone with the latter.

Woodford poses a good question: what is your role as shareholders if you don't wish to punish managers who have defrauded you?

[MrUltimateGaijin]

The worst thing Woodford did was to force them to have an opinion when they aren't in a position to formulate one.

which goes for Japanese people in general.

[2triky]

Olympus pres to resign, panel pushes $1.2 billion suit

TOKYO (Reuters) - An Olympus Corp panel plans to recommend the endoscope maker sue current and former executives for more than 90 billion yen ($1.2 billion) in scandal-related damages, and its president, Shuichi Takayama, is expected to resign by the end of the month, media reported on Sunday.

The panel, which is expected to make an announcement later on Sunday, determined that Takayama and five other current company executives had breached fiduciary duty by not spotting a 13-year accounting fraud that hid losses of $1.7 billion and thinned out the 92-year-old firm's net assets, Kyodo News Agency said.

Takayama, who took the helm of the medical device maker in October, is expected to announce his resignation as early as Monday, Kyodo said.

Olympus could not be immediately reached for comment.

Takayama had resisted calls that he resign, saying he was not involved with the loss cover-up and that his first responsibility was to rebuild the company's business after the scandal wiped out 60 percent of its market capitalization.

The company's main lender and major shareholder, Sumitomo Mitsui Financial Group, has backed existing management and its efforts to seek a capital tie-up to shore up its finances.

Takayama replaced former president and chairman Tsuyoshi Kikukawa in October, after ousted British CEO Michael Woodford blew the whistle on Kikukawa's involvement in the accounting fraud.

Woodford on Friday dropped his bid to return to lead Olympus, and said he would sue the company for unfair dismissal.

The company is likely to pick Takayama's successor from among the three board members the panel said were not responsible for the cover-up -- Masataka Suzuki, Kazuhiro Watanabe and Shinichi Nishigaki, Kyodo said.

The panel plans to recommend the company sue more than 10 current and former executives, including Kikukawa, former vice president Hisashi Mori and former auditor Hideo Yamada, Kyodo and other media said.

Source

[legion]

With Japan's life expectancy they might just have a chance of reaching a verdict on any law suit before these guys shuffle off to the great boardroom in the sky.

[legion]

The shareholders don't hold it against Woodford that he lifted the covers on Olympus. Rather, they are embarrassed that they didn't know what was going on when it is their own fiduciary duty to monitor their investments: especially longstanding holdings.

Did Woodford contact the shareholders before he sent his letter to the chairman?

[Mulboyne]

Did Woodford contact the shareholders before he sent his letter to the chairman?

I don't know the answer to that but I would doubt he did.

There are a few threads on the Japan Intercultcultural Consulting LinkedIn group about Olympus. Here, a guy called Dan Baum seems to despise Woodford for being culturally insensitive. He even writes that he hopes Olympus sues Woodford. He seems convinced it's the Englishman who is the guilty man and, in an earlier thread, accused him of obstructing prosectors by going public.

Another poster has chimed in with a more realistic appraisal:

Excuse me for barging into the conversation, but it would appear to me that whether Mr. Woodford is culturally blind or not does not reduce the validity of his case. The facts are that a couple of generations of Olympus management purposely and systematically committed accounting fraud on a massive scale (i.e., the losses at one point would have torpedoed shareholder capital), and that Mr. Woodford was fired for "doing the right thing", i.e., fulfilling his legal and moral obligations as a senior officer of the company. While not a lawyer, it would also appear to me that he has a strong case for wrongful dismissal, be it in the U.K. or Japan.

Traditionally, i.e., in my experience, ever since the Lockheed bribery scandals in the 1970s, such embarrasments to the Japanese political establishment and regulators have been swept under the rug, usually with the key person (the keeper of the secrets) committing suicide and the ceremonial resignation of the top guy.

The debate among my colleagues and I regarding the Olympus scandal was whether or not the company would be delisted, as was Kanebo in 2003 and Livedoor in 2006, or remain listed, as was Nomura Securities in 1997 after a major organized crime scandal. The other issue was whether or not the senior executives central to the scandal would do jail time. Livedoor's Takafumi Horie and his colleague Ryoji Miyauchi were the only executives in my recollection to do actual jail time in my 40 years in Japan. In other cases, the executives received suspended jail sentences, or merely skated free by resigning. Our fear was that if the company were delisted, the gory details of the fraud would be swept under the rug again and forgotten....until the next scandal, as is the preference of regulators, main banks and the accounting firms involved.

Insisting that the entire board resign so that Olympus could start anew (as was the case with Nomura Securities around 1997), is also the better alternative from Japan's standpoint. Such corporate malfeasance, and the reaction of large domestic shareholders as well as regulators to it, is having a visible negative impact on the health of Japan's capital markets. The Livedoor scandal in 2006 was the trigger for a large exodus of individual investors and foreign investors from small cap stocks that the JASDAQ and Mothers markets in Japan have yet to recover from.

The points that Mr. Woodford makes about board responsibility and director independence reflect the views of the Asian Corporate Governance Association and other major non-Japanese institutional investors. Increasingly, these investors are coming around to the view that they need only invest in those listed Japanese companies that have global standard corporate governance.

10 years ago, it made no difference what foreign investors thought, but foreign ownership of Japanese equities now at 27% (the largest single owner group) and accounting for 60%~70% of TSE trading volume, and foreign investors are now key to the health of Japan's capital markets. On the other hand, domestic institutional investors, the so-called friendly shareholders that Japanese companies have depended upon, have become structural net sellers of Japanese equities, meaning that the once-over-easy-and-sweep-it-under-the-rug response to such cases in the interest of avoiding public embarrasment is becoming detrimental not only to Japan's international reputation, but to the health of its capital markets as well as its pension system and financial institutions.

[legion]

I don't know the answer to that but I would doubt he did.

Easy to be wise in retrospect but perhaps he would have solved the issue more effectively if he'd sounded out his major shareholders first and worked out an objective, strategy and some tactics with them. He kind of reminds me of Gordon Brown announcing he was going to sell the UK's gold bullion and thus losing the advantage of surprise.

They could have probably engineered easing off the board members one by one, then making an announcement that they had found accounting "mistakes" and were rectifying them, coming out of it looking honest as a company as a whole.

As it is it's turned into a "them" vs "us" situation.

It always pays in Japan to pick your battles, and the time and place you are going to fight them.

[omae mona]

Easy to be wise in retrospect but perhaps he would have solved the issue more effectively if he'd sounded out his major shareholders first and worked out an objective, strategy and some tactics with them. He kind of reminds me of Gordon Brown announcing he was going to sell the UK's gold bullion and thus losing the advantage of surprise.

They could have probably engineered easing off the board members one by one, then making an announcement that they had found accounting "mistakes" and were rectifying them, coming out of it looking honest as a company as a whole.

Unless any of those shareholders were crazy enough to keep holding onto their stock after Woodford leaked the information, as you recommended, he would probably have found himself at the center of a huge insider trading investigation. Even with Japan's notoriously lax rules, you can't take such massively material, nonpublic information, and release it only to selected shareholders. All shareholders were defrauded when they bought (or held onto) the stock in the first place. Your proposal transfers the loss to the smaller investors who find out later than the big guys, who would have been busy selling as quickly and quietly as possible, until the news broke.

This was a game of "hot potato"; whoever was stuck holding the stock when the music stopped playing got burned. The only fair (and probably the only legal) thing for him to do was make all shareholders and market participants aware simultaneously.

[legion]

had thought about that

but now you point that out it is pretty obvious

[legion]

and having thought it over I wonder why he didn't go straight to the Japanese authorities when Price Waterhouse turned up the dodgy accounting

[damn name]

Looking through the lens of the retrospectoscope, quietly going to the authorities through a proxy, while building an alliance of influential board members and major stockholders might have been a strategy that worked. His strategy sure didn't. It appears that he just fired off his letter to the board without any real preparation, then went public.

He's not president/CEO material for a public company the size of Olympus. He might have been a good executive in marketing or operations, but building alliances (even if by threat of exposing dirty laundry) is how you govern and operate in the realm of large public companies.

The president/CEO job is to maximize profit for the chairman and the board, whose job is to maximize share value.

He clumsily screwed the pooch.

[Mike Oxlong]

Is it possible that, though he may not have been CEO material, he was brought in as a patsy, and managed to (perhaps inadventently) turn the tables on those who set him up to fail?

[damn name]

I thought he was brought up from managing director of Olympus Europa because of some operations success there. I don't think he was set up.

Pressure to enhance stock prices make people in almost every company in the world willing to stretch the rules. I don't see this as anything unique to Japanese companies and I don't think it will ever end.

[legion]

Is it possible that, though he may not have been CEO material, he was brought in as a patsy, and managed to (perhaps inadventently) turn the tables on those who set him up to fail?

I wondered if he was brought in to generate news to distract the financial press from the whiff of impropriety, the BOD being confident they could pull the wool over his eyes.

He had credibility based on his performance in Europe and length of service so they may have thought he could do the mythical gaijin shacho turn around, with the added safety net that if things went belly up they could blame the gaijin.

I wonder what will happen to whoever audited their books, they appear to have fallen down pretty badly.

[Mulboyne]

Looking through the lens of the retrospectoscope, quietly going to the authorities through a proxy, while building an alliance of influential board members and major stockholders might have been a strategy that worked.

Woodford had evidence of highly suspicious actions at his company. His responsibility wasn't to quietly go around building support in the company to get some action, it was to go on record in the belief that any reasonable executives would take action. In his mind, their refusal to do so was an abbrogation of their responsibility and he is surely right.

He called for their resignations. Who knows what he thought would happen but why should he have been expected to work with people who wanted to turn a blind eye to the evidence? Why should he have known that the board would rather sack him than respond appropriately to his concerns?

One of his first actions following his dismissal from the board was to go the authorities. He did so in Britain, which he was entitled to do since the transactions involved a British company and he is a British national. He didn't act illegally by not notifying the Japanese FSA first. He was asked at a Tokyo press conference why he hadn't gone to them immediately and he replied that he wasn't confident he would be taken seriously.

After all, the FACTA piece had been out for months but had sparked no request for clarification from outside authorities. He had just been shunned by people who should have been directly interested in his claims and was even given hints that he should be wary of gangsters - which now seems unfounded - which gave him good reason not to want to hang around in Japan. He asked the press conference whether they thought an approach to the police or Japanese FSA would have borne the same fruit and few seemed confident.

[damn name]

Unfortunately, everyone lost on the bottom line from this, and that's all that stockholders care about. They don't care if Woodford did the right thing or did the wrong thing, they only care about their money.

The company has lost prestige and trust and will suffer at the sales trough for it. The stockholders lost money and would never support him in a proxy fight. They want their money back, plus some, and don't care if he's a boy scout. That was Everest-level naivete on his part.

And Woodford lost. He says that his family has suffered. He'll forever be thought of as the guy who tried to kill Olympus. No board or investors will want him to lead their company.

I guess that he'll write a book, make the talk circuit and get polite applause from people who don't want him within a mile of their company, then maybe he'll try to find his way into a political appointment to some governmental financial oversight committee.

He's damaged goods in business now because that's the way business is, like it or not, good or bad, honest or corrupt, fiduciary responsibilities fulfilled or not.

[Yokohammer]

Woodford did the right thing.

1) He was appointed president of the company and brought a potentially serious problem to the attention of the management and demanded an explanation.
2) The management refused to cooperate and responded by firing him on the spot, in an obvious attempt to prevent exposure.*
3) He went public.

Sounds good to me. If I was running a large business Woodford is precisely the kind of guy I'd want on my team.

* [SIZE="1"]And although they say Woodford was fired because of his "selfish" management style, they have never provided one example of said selfishness. To them, the fact that he was about to expose their gross financial mismanagement was selfish. That is all.[/SIZE]