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Olympus shares suffer as former CEO goes on the attack

By dpreview staff on Oct 18, 2011 at 20:44 GMT

Former Olympus CEO Michael Woodford has launched a scathing attack on the company, following his removal from his post. Olympus had said Woodford was removed from his post over a difference in strategic direction between him and the rest of the Board of Directors. In a frank interview with the Financial Times, Woodford calls this 'utter nonsense' and states his belief that his removal relates to an investigation he had commissioned, into unusual payments and his suggestion that the board's Chairman and Vice Chairman should stand down over the issue. In response to suggestions that Olympus may try to prosecute him for disclosing this information, Woodford says: 'Bring it on.'

Olympus' explanation for the dismissal is given below, while the New York Times has published the letter Woodford says led to his removal as CEO. Meanwhile, the Financial Times has released an astonishingly blunt video interview with the former CEO, during which he says he has submitted his report to the UK Serious Fraud Office for investigation.

Shares in the company have fallen more than 30% since Friday, which is unlikely to spell good news for the loss-making camera division that makes up 16% of the company's sales.

Former CEO Michael Woodford and Chairman Tsuyoshi Kikukawa pose for the company's 2011 Annual Report

Press Release:

Olympus Corporation Resolved Dismissal of President Michael C. Woodford

Olympus Corporation (the "Company") would like to provide notification that the Board of Directors resolved at its Board of directors' meeting held today to dismiss the Company president as of today, as outlined below.

1. Reason for the Change

Michael C. Woodford has largely diverted from the rest of the management team in regard to the management direction and method, and it is now causing problems for decision making by the management team.

Hence, judging that realisation of the 2010 Corporate Strategic Plan with its slogan of "Advancing to the Next Stage of Globalisation" would be difficult to achieve by the management team led by Woodford, all the board directors attending today, except for Woodford himself who could not participate in the voting due to special interest, unanimously resolved the dismissal from his office of the representative director, President and Chief Executive Officer (dismissal from the office of the representative director, President and Chief Executive Officer and stays as director without executing right.) Along with this, it was also resolved that the representative director, Chairman Tsuyoshi Kikukawa double as the representative director, President and Chief Executive Officer.

Global management that Olympus aims is to implement management rules, information management and operation that are common throughout the world in order to establish a business infrastructure that is more efficient and quick to respond while making the most of a Japanese style management that sets a high value on people, technology and pride of monozukuri or manufacturing. To this end, all our employees will head for the same direction as we will urgently start establishing a new structure to go towards the same goal with the entire staff as one.

2. Contents of the Change

PositionNamePrevious Position
Representative Director, Chairman, President and Chief Executive Officer Tsuyoshi Kikukawa Representative Director and Chairman
Director Michael C. Woodford Representative Director, President and Chief Executive Officer

Comments

Total comments: 193
12
PaulSnowcat
By PaulSnowcat (Nov 2, 2011)

I was SO right to jump Olympus ship... Yet still I am missing a E510 with an articulated screen and better sensor, the supposed E710, which never came :( Too bad, really... Now I see why.

Well now I am with SONY, which made a camera that became a real Oly E3 successor for me - A77. Whis is actually like I was expecting E5 to be...

So... Olympus est mort, vive, Sony!

0 upvotes
Pork Slinger
By Pork Slinger (Oct 28, 2011)

Tsuyoshi Kikukawa who fired Woodford has now himself had to resign. There is nothing legit when a billion is missing and two of the big accounting houses have said the missing Billion does not pass the sniff test and the FBI is investigating. http://www.nytimes.com/2011/10/27/business/global/olympus-chairman-resigns-amid-widening-scandal.html?_r=1&scp=1&sq=olympus&st=cse

0 upvotes
sunhorse
By sunhorse (Oct 24, 2011)

Further reading about Olympus and the sudden change in direction that came about in 2008. There is some very good insight here. This is quite ominous, if true:

http://www.japansubculture.com/2011/10/olympus-bringing-it-into-focus-a-special-breach-of-trust/

0 upvotes
unlearny
By unlearny (Oct 24, 2011)

so glad I bought the GH1. Poor Woodford.

Comment edited 4 minutes after posting
0 upvotes
Robert Newman
By Robert Newman (Oct 23, 2011)

If you read the letter completely, it is clear that something illegal or unethical is going on at a very high level in Olympus - $670 million in payments to Cayman Island shell companies for unspecified services and a dilution in shareholder equity of $1.3 billion. This is not blackmail on Woodford's part. The Price Waterhouse findings are pretty damning. The date of the letter, October 11 and his ousting a few days later clearly show a circling of the wagons by senior Japanese board members that are all at risk for letting this happen on their watch. My guess is that Woodford will get a legal settlement of $50 million or so, the two top guys that authorized this will resign in shame and then be prosecuted, and the entire board will be replaced. Woodford is just the scapegoat.

Comment edited 1 minute after posting
0 upvotes
Lakers
By Lakers (Oct 22, 2011)

Like one poster said on another Olympus thread, Woodford clearly tried to blackmail the board and lost badly.

Read Olympus' response and you can see clearly that the payments were for options related to preferred shares for the Gyrus M&A case (mostly likely for tax purposes). The sum maybe hight but nothing suggest it's not legitimate.

http://www.olympus-global.com/en/corc/ir/tes/pdf/nr111019.pdf

I think a lot of people on this board had already made up their mind about guilt even before considering any evidence. This story will probably fizzle in a few months - Olympus has the football and they only needs to run the clock out on Woodford and his ilk.

0 upvotes
sunhorse
By sunhorse (Oct 24, 2011)

What a crock. The Olympus board's flimsy and pathetic spin doesn't hold water. I would encourage you to do some further reading beyond this press release. There is depth to this story, and so far no-one (besides one or two uninformed people on this forum) is suggesting blackmail on Woodford's part.

The story as it is developing, points to serious issues in the purchase of Gyrus as well as other deals. As others have already pointed out, the fees are outsized, and completely and utterly out of keeping with any norms. Both KPMG and PWC have found issues.

Don't believe it, just do your own research.

0 upvotes
tilariths
By tilariths (Oct 25, 2011)

Utter bullcrap.

0 upvotes
Najinsky
By Najinsky (Oct 25, 2011)

The original commenter clearly hasn't understood all the issues relating to the share options (such as different shares issued than approved by the board). The evidence of alleged wrongdoing looks very strong.

However questions regarding an allegation of blackmail are not surprising given the messy situation and the absence of some important facts. The American FT article specifically mentions the PWC report they've seen is undated. PWC has document management quality standards and the chance of that report being undated is zero. The date is being hidden.

If the PWC report dates from before he was promoted to CEO, then there are questions to be answered about why he was offered the CEO position (given the alleged management style conflict) and why he accepted the position, given the alleged financial wrong doing he'd discovered. You can't ignore of the darker implications of this. The date of the commissioning PWC report is important information, as is why it is being hidden.

Comment edited 4 minutes after posting
0 upvotes
Cy Cheze
By Cy Cheze (Oct 25, 2011)

Lakers, you have posted multiple attacks against Woodford and suggest he was wrong to question $687m in fees or the over-payment for odd companies with no track record of profits or relation to other Olympus products. Meanwhile, Olympus is losing money every quarter, has a heap of debt it might not be able to service, and you praise the boob-brained board. Why such remarkable efforts to fog the facts!

Are you, by any chance, close to an ex-Nomura employee who subsequently ran a firm called AXES?

1 upvote
Najinsky
By Najinsky (Oct 21, 2011)

I'd love to know the date of the PWC report.

1 upvote
The Customer
By The Customer (Oct 21, 2011)

Hardly matters -- in a few years, it's all gonna' be Lytro cameras or their descendants. :)

0 upvotes
racketman
By racketman (Oct 21, 2011)

$687m a third of the acquisition price, something very fishy here. maybe directors know Olympus is going uder and are putting some dosh away for a rainy day via a consultancy firm.

0 upvotes
justmeMN
By justmeMN (Oct 21, 2011)

"TOKYO, Oct 21 (Reuters) - The $687 million fee Japan's Olympus Corp paid its financial advisers for the $2.2 billion purchase of a British medical equipment maker is one for the record books, literally. The payment is the largest M&A fee ever made, Thomson Reuters data on fee estimates shows...The payment is equal to about a third of the acquisition price, jaw-dropping by normal standards where advisers usually take home about 1 percent or less of the transaction value for their M&A advisory services."

1 upvote
manny_d
By manny_d (Oct 21, 2011)

Well, i'm expecting 3/4 of the Olympus Corporation board committing the harakiri, soon.

0 upvotes
kd4ttc
By kd4ttc (Oct 25, 2011)

They've got 3/4 format lenses for that.

1 upvote
justmeMN
By justmeMN (Oct 20, 2011)

There is a really good Bloomberg article on this situation: "More Money Than Brains Leads to Olympus Shock: William Pesek"
http://www.bloomberg.com/news/print/2011-10-20/more-money-than-brains-leads-to-olympus-shock-commentary-by-william-pesek.html

1 upvote
rondhamalam
By rondhamalam (Oct 20, 2011)

That's why I choose Nikon and Canon. I cannot trust people like Michael Woodford

0 upvotes
sunhorse
By sunhorse (Oct 21, 2011)

You're joking right? I guess it would help if you read any of the articles out there right now.

Before Woodford was given the CEO post, KPMG already found irregularities in Olympus's financials dealings. Further these dealings could not have happened without the board's knowledge and consent. What happened when KPMG reported this? They fired KPMG.

Woodford, as the new CEO also commissioned PWC to look into the questionable deals. This is Woodford performing his fiduciary duties - something the rest of the Plympus board did not do.

So Woodford was fired because he was pushing for answers and asking the board to be accountable. And for that you don't trust Woodford?

What Olympus needs to recover from this is a new board.

Comment edited 1 minute after posting
2 upvotes
rondhamalam
By rondhamalam (Oct 21, 2011)

Michael Woodford is the joke.

Why should I care about Olympus.
Waste of time.
I am happy with my Nikon and Canon.

0 upvotes
sunhorse
By sunhorse (Oct 21, 2011)

Why? You should care about good governance. You should care that Woodford is a whistle blower. You should care that Olympus remains a viable competitor in the market. Finally, you should care that your ignorance is easily rectifiable, but for a little reading.

3 upvotes
shaocaholica
By shaocaholica (Oct 21, 2011)

What you just said makes no sense. The things that Nikon, Canon and Oly have in common have nothing to do with Woodford and this story. If you're going to troll, at least spend the time to write it coherently.

Comment edited 46 seconds after posting
1 upvote
OlyAmber
By OlyAmber (Oct 25, 2011)

Rondhamalam : *"Michael Woodford is the joke.

Why should I care about Olympus.
Waste of time.
I am happy with my Nikon and Canon.*"

Woodford highlights some iffy dealings to the board privately, he gets no joy so he takes it to the investigators and media ... and he's the bad fella in this?

Word up: if you done anything wrong, you don't seek out the law or publicise it in the media.

1 upvote
tilariths
By tilariths (Oct 25, 2011)

WTF are you talking about and does it have to do with cameras?

0 upvotes
BizzaBoy
By BizzaBoy (Oct 20, 2011)

Here what is bothering me. If I seek advise on something, I am making sure that the one I am taking advise from understands the issues I want to have advise about. In engineering, I'd ask a seasoned individual. In finance, I'd ask somebody who has been around the block once or twice. However taking advise from a firm that suddenly disappears does seem to be a very odd choice to me, irregardless of how much money did change hands.

Having waded throu the documentation that has been provided it also seemed odd to me the Olympus complied with the request to buy back the preferred stock. I am not quite certain about the timeline, but my understanding is that at the point of the buyback the assets of Gyrus had been reorganized within Olypmus, leaving only a financial shell. Hence the argument given that the "veto-power" would have presented a problem is rather insubstantial.

0 upvotes
Chester Cox
By Chester Cox (Oct 20, 2011)

advise is a verb. advice is a noun.

2 upvotes
Neoasphalt
By Neoasphalt (Oct 20, 2011)

The one way for Olympus to get out of this stagnancy is to make new 2-6 MPix P&S camera line (on 1/2.3'' sensor size) with very low noise and break down the megapixel myth.

Comment edited 1 minute after posting
0 upvotes
Franka T.L.
By Franka T.L. (Oct 20, 2011)

well, further report now say that might only be just the start of something even bigger. I wonder whatt the Japanese Authority going to do or act on this. They shave an undeniable duty to dig out the truth, and facts. But as Japanese goes, they might be reluctant to well shake the boat ...

In any case, one less reason for me to believe in Olympus doing their job. I feel pity for all those honest and decent Olympus employee who's doing their part, but now failed by their own boss

0 upvotes
Cy Cheze
By Cy Cheze (Oct 20, 2011)

This won't require any regulator watchdogs to wake from their slumber. Olympus creditors stand to lose billions if the company's net worth turns out to be negative. Banks and bondholders will sue. But the process will be slow, and this won't do the camera unit any good.

0 upvotes
Faintandfuzzy
By Faintandfuzzy (Oct 20, 2011)

Bye bye Olympus!

1 upvote
backfire hurts
By backfire hurts (Oct 20, 2011)

It sounds like management of a cheap toy manufacturer rather than a giant Photographic Equipment Manufacturer...

0 upvotes
rocklobster
By rocklobster (Oct 20, 2011)

Still, it won't stop me from buying the E-PM1 - a real bargain at the moment.

0 upvotes
AlanG
By AlanG (Oct 19, 2011)

So much for the Japanese tradition of honor.

0 upvotes
Peanut88
By Peanut88 (Oct 19, 2011)

Olympus is FINISHED !

Killed by their own management.

Investigate the management and you will find the truth !

0 upvotes
Cy Cheze
By Cy Cheze (Oct 19, 2011)

Olympus cannot shrug this off. At the end of March, it reported book net worth of $2 billion and debt over $7 billion. Writedown of the $687m in bogus fees, plus $957m paid for three dinky companies that barely exist, almost wipe out capital. Other assets may also be questionable. Creditors will have to take a hit and dispose of the viable segments to other companies. The creditors will sue, even if the regulators and auditors continue sleeping. Check the latest WSJ or FT articles, plus the Olympus IR filings. Hopefully, the camera division, whatever its future abode, will survive with some distinct identity. However, any smart buyer will wait until the creditors are desperate and bid lowball. The interim uncertainty. loss of credit, and judicial sanctions may starve the product support and development. This is sad.

1 upvote
mikeoregon
By mikeoregon (Oct 19, 2011)

If you read the Financial Times interview, it certainly sounds like someone at Olympus is siphoning money out of the company, so no wonder they didn't want Woodford snooping around, but he was just doing his due diligence. It's sad to see Olympus, once a fine camera company, fall so low.

5 upvotes
jkrumm
By jkrumm (Oct 19, 2011)

Olympus put up a PDF response to the media reports today...

http://www.olympus-global.com/en/corc/ir/tes/pdf/nr111019.pdf

0 upvotes
shaocaholica
By shaocaholica (Oct 20, 2011)

So what are they trying to say with that? The numbers still look the same.

0 upvotes
AbrasiveReducer
By AbrasiveReducer (Oct 19, 2011)

This is unfortunate for all concerned. I don't know how many people realize the precarious situation that the camera companies are in but this is the last thing Olympus needed. I presume Mr. Woodford is financially well off because he's going to have a tough time getting another job.

1 upvote
LJohnK2
By LJohnK2 (Oct 20, 2011)

...well I would think that shareholders that don't like to be ripped off by their senior mgmt or board would welcome Mr. Woodford...I think the federal government should hire him but they probably couldn't afford him :)

2 upvotes
AbrasiveReducer
By AbrasiveReducer (Oct 20, 2011)

All companies want and expect their top management to be team players, not crusaders. My guess is he'll be admired but not hired. Then again, it's a good time to be leaving the photo industry. With all the fan worship you'd think these companies were doing really well but that's not the case.

0 upvotes
Marty4650
By Marty4650 (Oct 20, 2011)

On the contrary.... I think Mr. Woodford has enhanced his marketability by demonstrating a zeal for sound management.

It's always a lot easier to find someone who wants to play with the books. Managers with integrity are in short supply today.

3 upvotes
OlyAmber
By OlyAmber (Oct 25, 2011)

Yes, but this is the real world. Whistle-blowers have shown themselves to be independant spirits willing to go it alone against their employers. However right their motives, you don't want someone who has the potential to be a trouble-causer in your employ.

You can't trust a whistleblower! Sadly...

Not my views, I abhor 'the system'.

0 upvotes
Bonku
By Bonku (Oct 19, 2011)

The only reason it has been reported and have some chance to be investigated as it has been reported to a European (UK) agency. Had it been in US or Japan, the whole episode would have been suppressed, as it would be "business as usual". Corporate accountability in US and Japan is far worse.

2 upvotes
Cy Cheze
By Cy Cheze (Oct 19, 2011)

Corporate fraud is hard to prosecute in any jurisdiction. Witnesses have nothing to gain and everything to lose by testifying to corroborate whistleblowers. Documentary proof may be absent or muddied by layers of sign-offs or concurrence by lower employees or board members. The boards usually include VIPs who will disgrace other firms or social institutions, if named defendants. The wall of omertà, plus the confusion that any long trial causes to jurors, makes a guilty verdict difficult to attain in the UK too.

Did the UK or EU prosecute any big CEOs lately? Oh, yes, there is a low level "rogue trader" here or there, who somehow bets and loses billions with management unaware. Tsk, tsk. But the brass of RBS, Dexia, and so on have done rather well, though their shareholders and taxpayers did not. But, who but fools buy bank shares or pay taxes, eh?

1 upvote
RDMPhotos
By RDMPhotos (Oct 19, 2011)

Its funny how corruption like this would cause wide spread media coverage and public outrage as well as a criminal investigation, if it happened in America.
But over there just get rid of the mosey executive , and its business as usual again , and no one seems to be interested..
Yea they were right, there are cultural differences.

Comment edited 13 seconds after posting
1 upvote
Najinsky
By Najinsky (Oct 19, 2011)

Well as the other party is a US company (and a former Cayman registered offshoot thereof) lets hope your people live up to your word. The only region it has been reported to for investigation is UK. So if you want to regionalise it, the score is:

UK: 1
JP: 0
US: 0

1 upvote
ThomasH_always
By ThomasH_always (Oct 19, 2011)

CEO going on a public attack after being fired by the board...
Wow, that might be a reason for a law suit. He has to accept it and show good style.

I am sure that the street's overreaction is rather only a buy opportunity. I am also sure that Mr Woodward is now persona non grata, professionally. His departure resembles HP's Leo Apotheker short tenure, characterized by unbalanced announcements without consulting with the board.

0 upvotes
justmeMN
By justmeMN (Oct 19, 2011)

Among other things, Olympus top management gave $687 million to "disappeared companies" in the Cayman Islands.

No, this doesn't resemble HP's situation, at all.

6 upvotes
Najinsky
By Najinsky (Oct 19, 2011)

Having seen the impact of whistle blowing first hand (my former business partner exposed some government corruption) I can tell you it is a gut wrenching moral dilemma between professional duty , honour and self preservation. Five years on he still had not found further work and left the region. This is a guy who had previously worked on big projects, like the Channel Tunnel. Last I heard he still hadn't found work.

The punishment for indiscreet honesty is very severe in the commercial world.

Comment edited 3 minutes after posting
2 upvotes
Simon97
By Simon97 (Oct 19, 2011)

There goes money for new product development. Down the road when the PEN E-PL7 comes out it will have, you guest it, the same 12mp sensor...

0 upvotes
rttew
By rttew (Oct 19, 2011)

as far as i am concerned, olympus has been dead in the water for some time now. they basically crapped on their customers with the e5 and their subsequent decision to go m 4/3 instead of 4/3, leaving those who invested money in 4/3 glass out to dry. then they get in to the toy camera craze with the PEN series...what a joke. who could possibly take OLY seriously anymore??? just go away OLY.

2 upvotes
justmeMN
By justmeMN (Oct 19, 2011)

OT: Speaking of DPR News, have they mentioned the closure of Sony-NEX and Nikon-DSLR factories in Thailand, due to flooding? These are major/main factories.

0 upvotes
RoAlmeida
By RoAlmeida (Oct 19, 2011)

A company with such admirable technology and strong reputation in the imaging business going through something like that is really disappointing.. Now we (loyal users) know why it's taking so long to get the products we've been asking for years.. Sad but true..

2 upvotes
justmeMN
By justmeMN (Oct 19, 2011)

"Oct 19 (Reuters) - Olympus Corp said in a statement on Wednesday that it paid a total $687 million advisery fee for its purchase of Britain's medical equipment firm Gyrus in 2008, contradicting a previous management statement.

Olympus did not name its financial advisers in the statement, and said it does not know the whereabouts of the adviser."

$687 million to "disappeared companies" - not too suspicious.

2 upvotes
Cy Cheze
By Cy Cheze (Oct 19, 2011)

According to the PWC report, one of the recipients of the money was a company with the same name as the following, described in "manta":

"Axes America LLC in New York, NY is a private company categorized under Financial Advisory Services. Current estimates show this company has an annual revenue of less than $500,000 and employs a staff of approximately 1 to 4. Companies like Axes America LLC usually offer: Christian Financial Planning, Online Financial Planning, Residential Outdoor Lighting, Home Equity Loan Refinancing and Divorce Financial Planning."

Time for Olympus Camera to be sold, clean the slate, and put under a management committed to that product line's profits and future.

0 upvotes
MichaelKJ
By MichaelKJ (Oct 19, 2011)

Makes one wonder why the Kikukawa insisted yesterday that the amount was $391 million.

0 upvotes
007peter
By 007peter (Oct 19, 2011)

Wow, 1-4 people company? That is outrageous. I thought its a typical consulting team of 10-20 people. Just 4 people, boy, this is so much worst than I ever thought

1 upvote
MichaelKJ
By MichaelKJ (Oct 19, 2011)

The information for Axes is from before it vanished. I tried calling the number listed for it and it is out of service. The company is also no longer in the Manhattan phone directory.

0 upvotes
Thomas Kachadurian
By Thomas Kachadurian (Oct 19, 2011)

Smells very bad for Olympus and the whole Japanese Business Culture. They need to come clean and get the stink off the rest of the company and community. A closed, honor based society only works when there is real honor. Protecting dishonor because it is within the society just drags everyone down.

7 upvotes
chekist
By chekist (Oct 19, 2011)

Digital photography world is so dirty... Intrigues, corruption. They should clean-up their act, and become clear and transparent - like politicians. :)

1 upvote
Klarno
By Klarno (Oct 19, 2011)

Actually this is more like the medical instruments world. Olympus' imaging division, which makes cameras, sport optics and voice recorders (basically all of their consumer products), only accounts for 23% of Olympus net sales.

0 upvotes
G1Houston
By G1Houston (Oct 19, 2011)

I am a biologist and use many microscopes from Olympus. While Nikon, Leica, Zeiss have all introduced brand new microscopes in the past 10 years, Olympus has not come out with anything that is truly new. So the lack of productivity is not limited to cameras.

1 upvote
mystic-bright
By mystic-bright (Oct 19, 2011)

hidden money , and payments to unknown recipients : can a "company" do that? yes, of course. Can the CEO be completely unaware of it? no. of course not. Not even as a possibility or even as a trend. Was the money destined to the organized crime (as suggested) ? It could be or maybe not but since it's unknown then it can be anything. Could be money to penetrate a new market? or a new area? or a new Country?
So get the settlement money and live happily. Don't "act" that it's all "new" to you.
What was interesting was more the fact that the media in Japan completely ignored the "news" . We can all guess the level of "professionalism" and independence (big word) from the power of the money of the media over there after watching that happening?

Comment edited 42 seconds after posting
1 upvote
007peter
By 007peter (Oct 19, 2011)

That is because "UNDER-THE-TABLE" deal is very common in Japan. So common that they don't even make page 4 of any newspaper. Japanese citizen are too nice, not angry enough to riot on the street. Basically, corruption is tolerated and accepted under the guise of "doing business" in Japan

0 upvotes
Cy Cheze
By Cy Cheze (Oct 19, 2011)

$687m is a rather hefty sum to filtch from a company that is not the private piggy bank of a few insiders. But it would not surprise me that the top executives get better legal shielding, and protection against wealth meltdown, than the TEPCO had for its reactors.

1 upvote
rondhamalam
By rondhamalam (Oct 19, 2011)

The fact that he attacked his former company, there's more than just dumping him away.

Go Olympus, go !
Never look back !

0 upvotes
cxsparc
By cxsparc (Oct 19, 2011)

You might first try to get a deeper background by reading the letter and the article.
He has given the report (compiled partly by PcW) to the UK fraud office. That company in the Cayman island has vanished within weeks after the last financial transfer.
There is more than just stocks falling for Olympus away -).

8 upvotes
meanwhile
By meanwhile (Oct 20, 2011)

It's not his former company, it's his present company. He is still a director, and when speaking of Olympus he's still saying "we", which I think points to him not actually looking to destroy the company, but fix the issues it has. He has been with Olympus for 30 years, I don't think he's trying to ruin anything.

3 upvotes
kristina123
By kristina123 (Oct 19, 2011)

There's always risks involeved if something happening in an unnatural way....and here is also not an exception

1 upvote
cxsparc
By cxsparc (Oct 19, 2011)

I read the letter and it is so utterly clear that parts of senior management of Olympus have diverted a massive amount of company money into their own pockets. Mere incompetence cannot be an explanation, since those involved had lots of experience, didn't seek financial advise and when such advice was given inspite of that, acted against it!
A illustrative example of corruption in Japanese society.
But there is hope -)):
If the Japanese economy can perform inspite of this disease, other economies also have their chance....

11 upvotes
Marty4650
By Marty4650 (Oct 19, 2011)

Lets take a minute to examine exactly what Michael Woodford did.

He discovered some financial improprieties and started questioning them. This was his responsibility as CEO.

I don't see him as a disgruntled employee in any way. He was a 30 year employee who had been promoted to president of the company just six months ago. Barely two weeks ago he was promoted to CEO, amid gushing and glowing praise from the Board of Directors.

Now the same Board of Directors fires him, citing "cultural differences." One would think these cultural differences would have surfaced some time during the last three decades of his career at Olympus.

If there are differences at all, they were ethical differences. In the USA and the UK a CEO is responsible to report any financial problems. Perhaps it is differenet in Japan. Maybe they are expected to cover things up?

30 upvotes
007peter
By 007peter (Oct 19, 2011)

Exactly, well said Marty. Woodford is FIRED for > DOING HIS DUTY <, in the US. Woodford can easily sue Olympus for > WRONGFUL TERMINATION <.

SARBANE OXLEY ACT of 2002, now required CEO to sign off on all financial records. S.O. Act prevent CEO from pleading innocence of "I didni't know this" excuse. Woodford has no choice but to investigate, otherwise, he is just as guilty as the chairman.

I applaud Woodford for his bravery and doing his Job.

7 upvotes
Cy Cheze
By Cy Cheze (Oct 19, 2011)

To comply with Sarbane Oxley, executives need only sign-off on stantardized attestations provided by subordinates. That way, they are exculpated from wrongdoing. They need only say that they believed what they were told and had all the proper approvals. Olympus shares trade in the US, and there may be an SEC investigation. the basis to prosecute any individuals may be meager, but the company may have to perform a Kabuki cleanup act to avoid delisting of its ADR.

2 upvotes
mlew
By mlew (Oct 20, 2011)

Er, does SOX apply to companies listed on the pink sheets? From what I understand, the pink sheets are a bit of a free-for-all, and if SOX doesn't apply, it's buyer beware.

0 upvotes
xlynx9
By xlynx9 (Oct 19, 2011)

I hate to say it, but I call for a boycott of Olympus until a full investigation is done into where this money went along with justification of the sums. I for one do not wish to fund potential "organised crime and racketeering".

3 upvotes
tilariths
By tilariths (Oct 25, 2011)

Why? It has nothing to do with the products and honest people working there.

0 upvotes
Raffwal
By Raffwal (Oct 19, 2011)

Well, I don't believe the board has put all those yens in their own pockets, but it is probably some business deal that can not be revealed for being not politically correct. And Woodford can't be such a boy scout that he'd be so surprised and ignorant. I suspect he was "blackmailing" the company, probably not for a promotion since he was already the CEO but perhaps for some income raise. Just a theory.

0 upvotes
Theelderkeynes
By Theelderkeynes (Oct 19, 2011)

Oh please on DPreview we find someone smearing an honest CEO? Raffwal should be ashamed.

7 upvotes
Raffwal
By Raffwal (Oct 19, 2011)

I don't know if you replied tongue-in-cheek or not, we really don't know who's honest and who's not. Admittedly the Cayman Island bank accound does sound fishy.

0 upvotes
Cy Cheze
By Cy Cheze (Oct 19, 2011)

Embezzlement and bribery are crimes that defraud shareholders, customers, creditors, and taxpayers. $687m in company funds cannot simply disappear as "consultancy fees," paid to a shell company.

Woolford was a 30-year company man. No "saint" rises to the top of any company, but you won't get any whistleblowers if you accept only the testimony of saints. To dismiss accusations, simply because they come from a "disgruntled" ex-employee, confers undeserved unction to egregious abuses. Woolford had a PWC forensic report to back his claims. Let due process take its course.

5 upvotes
Anastigmat
By Anastigmat (Oct 19, 2011)

Shocking. Why would anyone deserve to collect fees in the neighborhood of half a billion US dollars? What kind of "service" is worth that much?

5 upvotes
unsubscribe
By unsubscribe (Oct 19, 2011)

that's a lot of hookers.

4 upvotes
CameraLabTester
By CameraLabTester (Oct 19, 2011)

Olympus has got a very good 4/3 sensor who sniffed a raw deal, a hybrid shutter who can't keep the anomalies shut, an anti vibration and image stabilizer engine that's so good it's rocking the whole company, a pristine zoom lens that is like a magnifying glass on the accounts, and a great 100% viewfinder that has a permanent lens cap soldered on.

4 upvotes
FlashInThePan
By FlashInThePan (Oct 19, 2011)

beautiful. condense that into 5 lines and you've got haiku.

0 upvotes
meanwhile
By meanwhile (Oct 19, 2011)

Auto-focus great.
Sensor development stalled.
Where is the money?

Comment edited 2 minutes after posting
5 upvotes
AvanGarde
By AvanGarde (Oct 19, 2011)

This old scam, if you want to legally steal from your company ,you buy some expensive services then they share with you 50% or so of the profits.All theoreticallyl legal and has been done since ages.
Consulting and other law crap is perfect it doesnt require anything real to be delivered and you can price it as much as you want.

7 upvotes
007peter
By 007peter (Oct 19, 2011)

What is more outrageous is that $700 million paid is not for a big company, but rather an M&A Adverser team consist of maybe10-20 people? That is a crazy figure for an consulting fee.
http://www.moneycontrol.com/news/wire-news/olympus-confirms-it-paid-hefty-36687-mln-to-ma-advisers_601630.html

2 upvotes
Abbar
By Abbar (Oct 19, 2011)

I think by now most foreign investors have doubt about the other companies in Japan ..... they seems to be trying hard to put a lid on many hanky panky things..... previous year we heard TOYOTA trying to cover-up faulty cars and now Olympus... I wonder what's next..hmmm

0 upvotes
wetsleet
By wetsleet (Oct 19, 2011)

Toyota? What about Mitsubishi - talk to them about covering up faults!

1 upvote
Cy Cheze
By Cy Cheze (Oct 19, 2011)

Toyota's problem was with brakes that some people complained did not function properly. Initial cases might be dismissed, but Toyota conceded once the number of incidences, and test results, became compelling. The company recalled the cars and will fix the problem. No one accused Toyota management of misapplying funds.

Olympus, meanwhile, makes good products, but management owes some explanation of very strange uses of a large sum of funds.

1 upvote
luap_42
By luap_42 (Nov 18, 2011)

@Abbar: What other companies in Japan? Name them. TOYOTA? Bullcrap! The brake recall scenario was completely different, as it was a product defect/warranty matter. If you have no details about other companies in Japan, you have no busibness speculating.

0 upvotes
Boris F
By Boris F (Oct 19, 2011)

"Olympus corp. ousted its first non- Japanese president after less than seven months in the job... Chairman Tsuyoshi Kikukawa will take over the president’s role."
It's look like a culture misalignment and good chance to put responsibility on somebody else.

1 upvote
Azfar
By Azfar (Oct 19, 2011)

Makes you wonder how sincere they are with their customers, if not with the very company they run. Bad Olympus, Bad.

2 upvotes
Knight Palm
By Knight Palm (Oct 19, 2011)

A company present in Life Science and Medical is expected to have a high level of Ethics standard. That asset could spill over to their Imaging Systems Division. However, currently it seems to be the other way around.

Just hope for a clean slate of the current board, replaced with a new more transparent leadership with members from all the continents and with an equal female representation.

1 upvote
Knight Palm
By Knight Palm (Oct 19, 2011)

-What if Olympus runs their Japanese company the way it's common practise in Japan?

If so, running the company by western or European standards, might be to a competitive disadvantage for Olympus.

It might be that it isn't with Olympus this is all wrong, rather it's the business and tax regulations in Japan, that has created an alternative economy which Olympus and other Japanese companies are forced to align to, in order not to have competitive disadvantages.

4 upvotes
Hubertus Bigend
By Hubertus Bigend (Oct 19, 2011)

Every corporation has its share of dubious transactions going on. What is unusual in this case is that the Olympus board wasn't able to resolve it with Woodford like others would have done – with a golden handshake.

This and the matter itself – if an executive board directs their efforts primarily into constructing fishy acquisitions profitable for themselves in a way that nobody is supposed to find out – could very much account for many unintelligible decisions for their imaging division over the years, the latest being the ditching of their at the time perhaps most attractive DSLRs, the E-30 and the E-620, with the idea that Micro Four Thirds was ersatz enough already, which it wasn't and still isn't. But how should they have found time and energy for unimportant stuff like the products their manufacturing along the way?

5 upvotes
jon404
By jon404 (Oct 19, 2011)

They should hire William Gibson, who understands the future of Japanese technology far better than they themselves do.

1 upvote
queequee
By queequee (Nov 8, 2011)

So what happened to all the posters who said this was just the case of a disgruntled employee? If it walks like a duck, quacks like a duck, then it's massive accounting fraud unfortunately.

0 upvotes
Total comments: 193
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