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Olympus report finds management 'rotten' and proposes legal action

By dpreview staff on Dec 6, 2011 at 20:13 GMT

Legal action should be taken against the responsible members of a board of directors that was 'rotten to the core,' says the independent report into financial irregularities at Olympus. The report confirms the use of an elaborate scheme to move around $1.7 billion investment losses from the 1990s off the company's balance sheet. Those losses were then disguised as excessive transaction fees when Olympus bought other companies, and in write-downs on the value of newly purchased assets.

The report finds a number of former board members were involved and also criticizes the rest of the company's management for not questioning their actions. It also highlights failures in the auditing process. Meanwhile, although the share price has started to recover and the company has reiterated its intention to submit its Q2 earnings by the December 14th deadline, the New York Times has questioned the independence of the panel and its ability to fully investigate such a complex issue in a single month.

The report's dismissal of suggestions of connections to organized crime has prompted Japanese bank Sumitomo Mitsui to pledge its support to the company as it re-establishes itself and implements improved governance structures, Reuters is reporting.

Comments

Total comments: 56
tilariths
By tilariths (Dec 15, 2011)

Can you guys read? That money had been lost more then 10 years ago. Bad financial hedging bets.

Wrong thing was to try to keep that loss off the balance sheet, after some new disclosure laws.

This loss does not affect current operations. It is long under the bridge.

0 upvotes
yukonchris
By yukonchris (Dec 10, 2011)

Although there have been obvious governance problems, I think the Japanese may be too far thinking to allow Olympus to be "gobbled up" or to "disappear". It isn't just about bottom line when it comes to a company like Olympus, it is about a proud history of product excellence and an innovative future, at least I hope it is. Loosing Olympus would reduce choice and innovation for all photographers no matter which brand you prefer.

0 upvotes
Francis Carver
By Francis Carver (Dec 10, 2011)

Panasonic will probably buy up Olympus shares at 10 cents on the dollar, tops. Oly now has the ancient 4/3rd line-up of cameras & lenses, and very little by way of the current Micro 4/3rd. Panny taking the company over could be a Godsend.

0 upvotes
Francis Carver
By Francis Carver (Dec 10, 2011)

Olympus = front for the Yakutza. Simple, really.

Anyhow, now I finally understand how come Olympus is charging $800 for a 4/3 lens weighing only 130 grams. They have gotta recoup that 2 billion dollars somehow, after all.

0 upvotes
Shashikant
By Shashikant (Dec 25, 2011)

If the lenses are sold on weight then Nikon will make huge profit. Nikon macro (or micro in Nikon parlance) weigh a few kilos and the new version cameras also weigh kilos. so be ready to pay by weight irrespective of quality.

0 upvotes
The Scurvy Dog of PR
By The Scurvy Dog of PR (Dec 7, 2011)

I was one of those who were originally abandoned when Olympus discontinued the OM series- 'way back when'. I had thousands in the system. So I was little apprehensive when they chose to start the whole 4/3's thing. Now I'm glad I waited to move on a new system. Micro 4/3's was suppose to be the little brother to the ridiculous Digital SLRs we have today. I'm not surprised it never happened. They lack vision and do not innovate like they did in the early days of 35mm SLR's I still wish there was a spot metering system available today, that could do what the OM3 and OM4 could do. Pro level finesse. I also know Sony is now sitting on many of those Minolta patents, Olympus used. Have you ever compared an OM SLR next to any current D/SLR? I have. The camera industry as a whole is about 'unit sales', not about creating great products. Though there are a few exceptions.

5 upvotes
roliaz
By roliaz (Dec 7, 2011)

Are you serious? What does illegal actions at the boardroom level have to do with camera design?

1 upvote
MEBEE
By MEBEE (Dec 7, 2011)

Nothing really but the guy obviously wanted to express his disappointment with Olympus.

0 upvotes
dark goob
By dark goob (Dec 8, 2011)

How do you know it's a "guy"? Because he's whining like a ...

1 upvote
evshrug2
By evshrug2 (Dec 10, 2011)

goob, I'd assume "The Scurvy Dog of PR" is a "he" because of his profile picture. And also because "he" is commonly accepted as a general third-person reference.

Back on topic though, I thought Olympus DSLRs DID offer spot metering? Maybe the spot's size isn't as small, but certainly that was one key feature that had me choose the E-500 way back when over the Canon XT and Nikon D50. SSWF and appeal of print colors were probably the other two biggest things.

I certainly hope Olympus comes back, because I feel they really tried to define what a Digital system would be like (unlike the conservative C&N) with their mount and image circle specifications, non-crippled software features as they thought of them, live-view, the continued embracement (?) of IBIS, etc.

Comment edited 43 seconds after posting
0 upvotes
safeashouses
By safeashouses (Dec 26, 2011)

Still on about your OMs? Are you really... oh never mind. That was years ago, years and years ago.

0 upvotes
Franka T.L.
By Franka T.L. (Dec 7, 2011)

None that much to me anyway, when Oly abandon 4/3 , they have already shown their willingness ( lack of it ) to support customer. The inability yet ( and already for so long ) to provide a proper solution for 4/3 user to migrate to M4/3 is another nail on the coffin if not the last.

It is for their good to simply spin off the medial / industrial division and let that survive as a viable entity; and for the rest , well its business; if it dictate that the imaging is losing money and not likely to be healthy in due course, then let it honorably retire instead of dragging it on ( just as they try it with OM back then )

0 upvotes
CameraLabTester
By CameraLabTester (Dec 7, 2011)

Now showing:"All The Photographers Men" The Olympusgate Drama

1 upvote
evshrug2
By evshrug2 (Dec 10, 2011)

lol or "The Sharpest Men in the Room" like the Enron movie? maybe it should be the "Sharpest Lens, Dirtiest Men..."

0 upvotes
icexe
By icexe (Dec 7, 2011)

I curious as to what this would mean for Panasonic? Will they continue to support and advance m43 without the resources of Olympus in the game? Or would m43 be pretty much dead?

0 upvotes
onlooker
By onlooker (Dec 7, 2011)

Olympus revenue: US $11 B
Panasonic revenue: US $107 B

1 upvote
M1963
By M1963 (Dec 7, 2011)

Panasonic? That rings a bell... oh, yes, my mother used to have a Panasonic vacuum cleaner. It was very good until the pipes started to get torn and dust leaked all over the place, a problem which was fixed with some duct tape. It lasted four years. I also remember it was red.
That's all *this* Olympus owner has to say about Panasonic. I hold Canon, Nikon and Pentax in high respect, not Panasonic. And let's not forget they killed Technics - which is what they'll merrily do if they buy Olympus imaging division.

0 upvotes
Joseph S Wisniewski
By Joseph S Wisniewski (Dec 9, 2011)

Yeah, M1963, it's not like your Oly mft cameras have Panasonic sensors and processors, or circuit boards laid out and designed by Panasonic, or Panasonic shutters or anything...

Hey, isn't that a Panasonic with a Leica label on the front page of dpReview today?

2 upvotes
Daniel Lauring
By Daniel Lauring (Dec 9, 2011)

I've had Panasonic vacuum cleaners, Plasma TV's and receivers. All have been great. Been real happy with the GH2 too.

1 upvote
Francis Carver
By Francis Carver (Dec 10, 2011)

@ M1963: Canikons are pretty much ancient garbage, Pentax an also-run, so by default Panny rulz!!! :-)

0 upvotes
yukonchris
By yukonchris (Dec 6, 2011)

At least Olympus is being cleaned up. Given the right management, they may come back with renewed vigour. Does anyone remember Apple during the "death watch days" in the late 90's? They were on their knees and down for the count but a new management vision brought them from that to the head of the class. There's no reason Olympus couldn't do the same.

I hope Olympus does turn around. I hope they continue to pursue m4/3rds and initiate a second line of cameras to compete with the full-frame models offered by Canon and Nikon. I think we really need someone else in that market space to shake it up. What actually happens though, is anyone guess right now.

2 upvotes
HeezDeadJim
By HeezDeadJim (Dec 7, 2011)

Oly/Panny is currently the only promising answer to smaller form factor cameras (NEX series doesn't have enough "good" lenses, yet). It would be bad if Panny loses momentum too and the whole m4/3 dies. Like Betamax, I'd hate for Nikon's or Pentax's Q to become the only option because of "better marketing" strategies for inferior products. We have too many proprietary small camera systems and lens mounts. At least m4/3 lenses could be used on any m4/3 camera (upgrading camera bodies even between brands would be nice).

1 upvote
deep7
By deep7 (Dec 6, 2011)

You have to wonder how many other companies are getting worried that investigations will go beyond Olympus. Dodgyness may be becoming the norm these days. None of this stuff is surprising.

2 upvotes
Ashley Pomeroy
By Ashley Pomeroy (Dec 6, 2011)

It'd be fascinating to know what the plan was going to be if none of this had come out; if they'd never hired Woodford, and if they'd managed to keep their rottenness under wraps. Were they hoping that they could continue to lose money hand over fist indefinitely, and the banks would play along? Perhaps they would. Or were the people in charge hoping that it would all fall apart on the next team's watch?

1 upvote
evshrug2
By evshrug2 (Dec 10, 2011)

Very good question... they probably didn't have a rational long-run plan.
But it was highly possible that they were going to blame things on Woodward... erm, woodford? Please forgive me for the lapse, but in general I bet he reacted to what he recognized as a scapegoat situation.

0 upvotes
Ibida Bab
By Ibida Bab (Dec 6, 2011)

This should help Christmas sales...

0 upvotes
DotCom Editor
By DotCom Editor (Dec 6, 2011)

I wonder if they still make cameras.

0 upvotes
expoboy52
By expoboy52 (Dec 6, 2011)

"Rotten to the core".... the same could be said for the management of most corporations in the U.S.

Comment edited 26 seconds after posting
2 upvotes
snake_b
By snake_b (Dec 6, 2011)

So get rid of all of them. That's a dumb statement.

2 upvotes
Cy Cheze
By Cy Cheze (Dec 6, 2011)

Sumitomo Mitsui and other creditors have $7B at stake, which is a lot more than the depleted value of the stock or the pride of a few camera owners, whose goods will continue to work for a long time.

The story about Yakuza involvement was a red herring to distract from the responsibility of the BOD for what went on. Perhaps Kikukawa had to recruit some people from low places to perform certain tasks, but the real flaw was the inability of "good people" to say no to financial shenanigans before the fraud snowballed to gigantic scale.

However, some still hate the news less than the news bearer, as if there is some quiet way to blow the lid on a Ponzi. They have no clue what it means to challenge a B. Madoff, a J. Corzine, or a M. Rich.

If anyone is to turn Olympus around, it will take a mix of SOB and astute knowledge. If not Woodford, then perhaps a near-Yakuza who knows which executives need to hear an offer they cannot refuse. No more smoke and mirrors.

1 upvote
Anepo
By Anepo (Dec 6, 2011)

Let's put it this way: I sold my Olympus few weeks ago and have decided to NEVER give Olympus a chance again.

1 upvote
thx1138
By thx1138 (Dec 6, 2011)

Perhaps the board of Kodak should be called in to turn things around. ;)

Nothing surprises me any more when it comes to corporate and government scumbaggery and I have zero faith in those called into investigate and regulate.

1 upvote
Cy Cheze
By Cy Cheze (Dec 6, 2011)

Anepo: Apparently, you've never posted anything to the forums other than this. What brand did you buy? Anyway, whoever, buys Olympus cameras second hand probably can get good articles for a low price. The executive corruption has nothing to do with the quality of the goods, although the former may imperil the ability to go on developing or producing cameras.

3 upvotes
mike earussi
By mike earussi (Dec 6, 2011)

landscaper1, unfortunately you're far from being correct. Olympus' ability to get away with it for so many years even with "professional" audits calls into question Japan's entire corporate culture of saving face by never admitting mistakes. If Olympus is rotton then how can anyone know whether Nikon, Fuji, Canon, etc aren't also corrupt? This casts a shadow on every corporation in Japan.

5 upvotes
Cy Cheze
By Cy Cheze (Dec 6, 2011)

Several consumer electronics giants are losing money, and share a reluctance to shut down or discontinue losing ventures. The operating results are also obscured by currency valuations and inventory valuations. Marked to market, just how much are all those widgets on the books really worth? How much discounting will it take to get people to buy some stuff? The Boards are seldom attentive or challenge the executives. Japanese firms are not alone, though, and let's hope not all are hiding losses the same way.

2 upvotes
Dennis Linden
By Dennis Linden (Dec 6, 2011)

I would just point out that Oly made a whole lot more than cameras. Medical and Lab gear by them is great. I am sure that these irregularities are not limited to camera division which is only a small portion of their portfolio. They recently divested the lab instruments, and I could not figure out why, perhaps herein are the clues.

0 upvotes
stoneinapond
By stoneinapond (Dec 6, 2011)

@landscaper1,

Do you read EVERY article that DP Review posts? I'm sure there are some that do not interest you. It's quite simply. Don't click on those, this one included. For the rest of us, this is gripping stuff.

3 upvotes
landscaper1
By landscaper1 (Dec 6, 2011)

I realize there are a lot of people who use Olympus cameras. But seriously, this has nothing to do with photography, per se. If Olympus were a major player in the digital camera market, it might be of some interest, but if Olympus were to cease producing photographic products tomorrow, there would be a very small impact on the field of consumer photography and it would be of very limited duration at that.

I'd prefer dpreview focus on the technology and techniques of photography and leave the financial issues of camera manufacturing to the financial pages.

1 upvote
Tim in upstate NY
By Tim in upstate NY (Dec 6, 2011)

For those of us who use Olympus equipment, what happens to the company has quite a lot to do with our photography. If you're not interested, you should consider going about your business without being concerned with this topic.

8 upvotes
MichaelKJ
By MichaelKJ (Dec 6, 2011)

It is of considerable interest to those of us who use Olympus cameras. If you aren't interested in this scandal then don't read about it or waster your time commenting.

0 upvotes
photophile
By photophile (Dec 6, 2011)

Got the data and appropriate references to back up your claims ?
P.S - what is consumer photography ?

0 upvotes
Anepo
By Anepo (Dec 6, 2011)

I sold my Olympus few weeks ago and will never again give Olympus a chance

4 upvotes
Cy Cheze
By Cy Cheze (Dec 6, 2011)

Dpreview need not concern itself with each company's share price or quarterly earnings, but chronic losses or malfeasance certainly affect camera developments and photography. Technology is not a genie who works in Santa's shop. It's a process that lives or dies by market, institutional, and financial events. The demise of Olympus would be at least important to cameras as that of a major auto firm would be to that industry. The question here is whether the future of Olympus is like that of Saturn and Pontiac, or like that of Jeep or Renault Trucks.

1 upvote
M1963
By M1963 (Dec 6, 2011)

Or that of National and Technics, Cheze!
People who buy Canikon products will never understand why Olympus owners love the brand. Olympus is a unique brand and as so it is irreplaceable. If Canon ceased production, former Canon consumers would buy Nikon products, and vice-versa. If Olympus dies, owners of Oly cameras and lenses would have a very hard time changing to another brand.

1 upvote
88SAL
By 88SAL (Dec 7, 2011)

Hi,

My name is Sam, I used to be a Canikon.
I love my massiveNikon SLR with 2 big lenses in my day kit.. Its not as needlessly fat like canon, but its still a load. One day I took a leap, (big leap for a Canikon), and bought an Olympus EPL3. It does pretty much everything my SLR does, bar quality of view finder, but thats only time. Now my back doesnt hurt and I can take my camera anywhere and not feel like im missing out on creative potential because I took my small camera.

Point being, Olympus has offered a product (with pany) that the big shots have missed. Even nikon missed the mark with 1. Might be a fine camera in its own system, but any who is real on photography doesnt want a to knwo about that sensor size.

I find the non technical camera news that appears on DPR refreshing and comprehensive to my photographic experience. Good work DPR keep doing it. You strive to improve and it shows.

Also, do you take bribes from sony? Just got the paranoia now...

1 upvote
CurtisLewis
By CurtisLewis (Dec 12, 2011)

@ landscaper1,

That is a rather narrow, short sighted view of a major issue with the potential to impact the entire industry greatly. "...if Olympus were to cease producing photographic products tomorrow" the field of competition would diminish in size resulting in the slowing of progress.
And what if they are all corrupt? If this is the tip of the iceberg and we find out this type of business has been common place for your 'more relevant' Japanese camera companies, then what? Won't those financial issues begin to impact your technology and techniques?
Just because you didn't chose Olympus doesn't make this news any less relevant to those that did. Photography doesn't exist in a vacuum created by Canon and Nikon.

0 upvotes
Pangloss
By Pangloss (Dec 6, 2011)

There are many issues at this moment with Olympus:
1) Nobody knows how much the company is worth, since its accounting has been compromised over the last 20 years(!).
2) Investors have lost confidence and employee morale is probably pretty low.
3) Mr. Woodford should quickly be reinstated as CEO and President and be allowed to form a new management team.
4) The company *urgently* needs to complete its financial accounts review in time to submit to the Tokyo Stock Exchange to avoid delisting (by Dec. 14).
The 92-year old company is in E.R. at this stage and unless they act very fast, it could disappear in the short term.

2 upvotes
Tim in upstate NY
By Tim in upstate NY (Dec 6, 2011)

Woodford being reinstated is about the only way for Olympus to signal to the world that is being reformed and deserves to survive. Anything short of that probably won't be enough to save this company. I love my Olympus cameras and lenses and hope that this company can somehow come out of this crisis intact and viable.

3 upvotes
OneGuy
By OneGuy (Dec 6, 2011)

It seems Woodford is a straight shooter and a smart one at that. Don't own any Oly gear but wish he'd get a chance to make it right even if it results in but a (smooth) merger with Panasonic. I think Pana could use the Oly image processing software too if it wants to enter into the 20+Meg sensor size market.

0 upvotes
rrr_hhh
By rrr_hhh (Dec 6, 2011)

Frankly I don't think that Woodford is the right person for the job. Olympus doesn't need an ambitious shark, apparently caring more for his personal power than for the company. They don't need someone who try to manipulate the shareholders to his advantage. They need someone who wasn't involved in the conflicts of the past months. Someone who can reunite the employees behind him and who has long term goals. If Woodford is reinstated by the shareholders, he will be their hostage and won't be able to look for long term solutions. If the shareholders have the last say, then they will only care for their short term benefits.

2 upvotes
Cy Cheze
By Cy Cheze (Dec 6, 2011)

By rrr_hhh: Kikukawa might agree with you. But sweeping problems under the rug can't work when the company is already losing money. You can't have long term goals if you have $7B in debt, cash reserves are falling, violation of debt covenants, and books and records that no one can believe.

An ambitious shark, who needs to keep Olympus financial viable to assure a supply of meat, may be exactly what the company needs. If not Woodford, then whom might that be?

If you nominate a third party trustee, you'll lose a year just figuring out who is lying or not. The company must be hostage of some stern taskmaster now or it will not survive.

1 upvote
rlh1
By rlh1 (Dec 6, 2011)

@ rrr_hhh
I suggest that what Olympus Corporation needs is probably not what would benefit the ongoing development and production of Olympus cameras.
If the financial position is as indicated by this latest report the incoming CEO, whoever he/she is, will have one overriding priority, to save Olympus Corporation. It appears that the mainstay of the corporation is the medical equipment business which is the obvious candidate for saving and future support.
I think it possible that the cameras division could be disposed of 'for the greater good'.

1 upvote
M1963
By M1963 (Dec 6, 2011)

Which would be a shame, unless a company with a genuine interest in photography and willing to preserve the Olympus brand would buy the camera and photo division.

1 upvote
MichaelKJ
By MichaelKJ (Dec 7, 2011)

There are many interesting things about this scandal and one of them is how polarized people are about Woodford. Despite the fact that he had the guts to stick up to the criminals at Olympus, some people here are intent on demonizing him. Steve Jobs made cut backs when he was reinstated as CEO and ruled Apple with an iron fist. Woodford is obviously no Steve Jobs, but my point is that good CEOs are not someone you would want for a friend.

1 upvote
Rriley
By Rriley (Dec 7, 2011)

'I think it possible that the cameras division could be disposed of 'for the greater good'.'

problem is, so sold to whom ?

0 upvotes
herebefore
By herebefore (Dec 8, 2011)

There is some latitude to the phrase "disposed of"...

When I "dispose" of something around the house, I have at least 2 choices... sell it OR take it to the landfill...

If there is no buyer for Olympus camera division, it can still be "disposed of".

0 upvotes
Total comments: 56