Another Olympian riddle


Weird scenes inside the gold mine – an unanswered question about Olympus

Michael Woodford Photo: Hugh Ashton

TOKYO (majirox news) — Michael Woodford’s public statements in Tokyo on November 24 and 25 have raised an interesting point. He has stated that he “felt they [Olympus management, i.e, former ChairmanTsuyoshi Kikugawa], brought him in because there were some changes needed in the companies around the world.”

Changes to the management of the medical device division in the United States, together with other changes to the European companies, and an examination and realignment of the cost structure in Japan were all part of the wish list. He has also stated that the Facta article had not been written, he probably would never have known about the shady deals that have rocked the company and would have continued running the company, cutting costs and carrying out other necessary restructuring.

His meeting with Kikugawa where he was asked to become the President and COO of Olympus Corporation took a mere 20 minutes – which would seem to be a short time to discuss such a momentous decision, but it assumes that both parties in the discussion knew each other well, and that there was a mutual understanding of each other’s wishes and requirements.

It was a momentous decision because not only was Kikugawa appointing a foreigner to the nominally highest post in the company (it was later admitted that “COO” and “CEO” were merely “just English titles” that meant little), but, as Woodford told the forum: “I’d reported bribery once in Europe and corruption once in Europe, so I have a reputation for that, and they knew it. One of those cases was in 2008, and it went to the general prosecutor … in March of this year. So I have form in reporting corruption and wrongdoing. I was disturbed [at the meeting where he was stripped of his position] – they were scared of something more than me. It might be going to prison for doing bad things, it may be because they’d been associating with nasty people,” adding that the true reason will come out when the authorities investigate.

Woodford had been with the company for thirty years – the Japanese management had full knowledge of his working history and his habits. Not only was he a whistle-blower, but he was an M&A expert – this was one of the fields where he had proven expertise.

And as we all now know, Kikugawa and the Olympus executives were sitting on a very smelly pile of shady deals. Whether they originated them or not has yet to be determined, but there was a rotten mess of dirty deeds, all connected with Woodford’s specialty of mergers and acquisitions, waiting to be discovered (they did not show up in the consolidated accounting statements, and since the Gyrus deal was managed from Tokyo, there was no sign of them in the figures for the European arm, for which Woodford had previously held responsibility).

By appointing Woodford to a senior position, the Olympus board was taking an enormous risk. This was a foreigner who would not understand the accepted code of conduct governing tobashi (window-dressing) dealings – he even had a reputation for exposing malfeasance – and whose brief was to dig into the finances of the Japanese operation. It would almost seem as though the Olympus management wanted these deals to be exposed. Otherwise, the appointment of the first foreign President (and only the fourth foreigner to be appointed as the head of a major Japanese company) who had a reputation for expertise in M&A affairs, and a reputation for sniffing out and exposing wrongdoing, makes little sense. Were Olympus management really making a long-term four-year bet on Woodford’s inability to read Japanese balance sheets (or magazine articles), and their cleverness in hiding past their wrong-doing?

This question, together with many others, as yet remains unanswered. Stay tuned…

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