Woodford: “This could be a watershed for Japan, a country I love, and it may be Olympus that brings about the change.”
TOKYO (majirox news) — On Nov. 24, Michael Woodford, the former president and CEO of Olympus Corporation, talked to a Tokyo audience at a forum organized by The Economist, together with Shigeo Abe, the publisher of Facta, the Japanese business magazine that first broke the story to the Japanese public, and Jonathan Soble of the Financial Times.
Woodford admitted to having been skeptical of the Japanese authorities’ willingness to pursue the matter further.
“If this was fudged, it would be so harmful to Japan,” he said. “It would really frighten foreign capital away.”
However, following his meetings earlier in the day with the Japanese financial authorities, including the Secretary-General and the Assistant Secretary-General of the SESC and the Japanese prosecutors, Woodford now believes that the matter will be fully and properly investigated.
“This could be a watershed for Japan, a country I love, and it may be Olympus that brings about the change” he said. “I think they will do this right. Justice will be done, and maybe it’s the media who have helped to bring this about.”
Delisting the company from the Tokyo Stock Exchange, however, would not be productive. “It won’t help, and if they continue to list, the investigation will continue,” he said.
Despite everything, Woodford’s pride in the company, and his enthusiasm for its products still shines through (he joked before the speech that he would only speak into journalists’ recorders if they were made by Olympus).
According to Woodford, there is much to be changed in the general field of Japanese corporate governance – not only in Olympus. He had harsh words for the system of cross-holdings, whereby stockholders never sell shares, and never criticize the boards of those companies in which they hold shares. He also pointed to the contrast between Nissay, the largest Japanese stockholder, who meekly asked for “clarity,” and the Western holders who “have been coughing blood and going nuts.” He added, “Cross-holding served its purpose [after the war] but it should now be made illegal.”
Citing the influence of former Chairman and President Tsuyoshi Kikugawa inside the company, who has been fingered as a key player in the accounting scandal, Woodford also recommended remuneration and appointment committees, rather than relying on one man’s recommendations, as has been the case. “The American model is the best,” he said, with its role for non-executive directors, who have legal responsibilities along with the title.
He had words for the Japanese press, who ignored the article in Facta that was brought to his attention and started the ball rolling. Abe of Facta pointed out the close links (golfing and board-level) between managers in the national financial press and Olympus, and the unwillingness to print criticism about friends (and advertisers).
But the question in everyone’s minds, especially since the New York Times disclosed the contents of a memo alleged to be from Japanese authorities, was “To what extent was organized crime involved here?” Woodford did not confirm or deny the existence of such links. “We have to follow the money,” he said, adding although there was no concrete proof of yakuza involvement, that he had “no intention of being a dead hero” and that he had taken (unspecified) security precautions.
One point that he had noticed when he informed the Olympus Board of his findings regarding the Gyrus affair and the purchase of the three “Mickey Mouse” Japanese companies (as Woodford terms them), was a look of fear on their faces. “Was it the fear that they might go to jail? Or the fear of something worse?” he asked. Facta’s Abe emphasized that his magazine had uncovered no direct connection with organized crime, though an indirect link had been discovered and publicized by Facta in the articles which originally started Woodford on his quest.
As the participants were leaving, the news broke that Kikugawa, former Vice President Hisashi Mori and auditor Hideo Yamada had formally stepped down as board members and executives. The news must have been a relief to Woodford, who had frankly confessed that he was not looking forward to the next day’s Olympus Board Meeting.
Woodford noted that a true and thorough investigation, no matter what unpleasantness may come to light, will result in a cleansing process for Japanese business overall, and help restore the world’s faith in Japanese business.