Japanese Manufacturer Olympus Fires CEO for Doing His Job

Lack of Ethics in Business Knows No National Boundaries

The Japanese camera and medical products manufacturer, Olympus promoted its first non-Japanese President to the position of CEO 14 days ago.  Michael Woodford is an Englishman who had been with the company for 30 years and worked his way up the management ladder.  Eights months ago he was named Chief Operating Officer and just two weeks ago the Board of Directors appointed him CEO.  Here is what they said at the time.

When promoting Mr Woodford to chief executive two weeks ago, Tsuyoshi Kikukawa, chairman, said he was “extremely pleased” with the Briton’s leadership, which had “exceeded my expectations”.



Mr. Woodford - Another British
Man for All Seasons



But as soon as Mr. Woodford got the top job he began looking into questionable payments with respect to an acquisition the company had made.

In the Gyrus case, the documents show that Olympus paid $687m to a Cayman Islands-registered company, AXAM, that had been named as a financial adviser but whose ultimate owners were never ascertained by Olympus. The company disappeared from the trade register three months after receiving its final payment from Olympus, Mr Woodford said. The amount paid represented about a third of the $2.2bn acquisition price.

And Mr. Woodford was not alone in questioning the payment.  The company’s auditors, KMPG had raised similar concerns.

Olympus’ own auditors had privately identified problems with the Gyrus transaction, the documents show. KPMG, Olympus’ auditor until 2009, said in an internal report dated March that year: “In our opinion proper accounting records have not been maintained.”

So how did a grateful and competent Board of Directors react?  We don’t know, we only know how the Board of Olympus reacted.

Olympus replaced KPMG as its auditor when its contract ended two months later. KMPG declined to comment.

And as far as Mr. Woodford was concerned, well he was summarily fired

Mr Woodford said he believed that he had been sacked over his inquiries into the acquisitions, which took place before he joined the board. He was not allowed to speak at Friday’s board meeting that voted unanimously to dismiss him. “They told me to catch a bus to the airport,” he said.

Here is what probably caused his dismissal

In a letter to Mr Kikukawa dated October 11, he described “a catalogue of calamitous errors and exceptionally poor judgment which … has resulted in the destruction of shareholder value of $1.3bn.”

See, just like some companies in America, Olympus cannot have management out there protecting the rights and value of the shareholders.  That would not be right, the shareholders just own the company so they are not entitled to any consideration.

As for Mr. Woodford, well he is welcome to take over the top position at any company he likes.  But with a record of standing up for shareholders, he probably will not be in great demand.