[LRflex] Woodford Admits Defeat in Effort to Return to Olympus - NYTimes.com
- From: "W.B. Abbott" <captbilly3@xxxxxxxxx>
- To: leicareflex@xxxxxxxxxxxxx
- Date: Sat, 7 Jan 2012 16:55:42 -0800
Another chapter in the Olympus affair; the criminal investigations continue.
Bill
With Olympus Managers Still Entrenched, an Ousted Chief Drops His Sword
By HIROKO TABUCHI
Published: January 6, 201
TOKYO ? Michael C. Woodford had been an audacious challenger to the staid ways
of corporate Japan: a British chief executive, fired after exposing extensive
fraud at Olympus ? one of Japan?s vaunted blue-chip companies ? who took his
evidence public and started a proxy fight to win back his job.
But Mr. Woodford ended that bid on Friday, saying he had been unable to garner
the support of Olympus?s Japanese institutional investors and creditors.
?Despite one of the biggest scandals in history, the Japanese institutional
shareholders have not spoken one single word of criticism, in complete and
utter contrast with overseas shareholders, who were demanding accountability,?
Mr. Woodford said Friday. ?I?m taking the plane and saying goodbye to Japan as
a businessman.?
For the Japanese business world, it could prove a damaging conclusion to a
scandal that had come to be seen as a test of just how far the country would go
to police white-collar crime at Olympus, a maker of cameras and medical
endoscopes.
A perceived reluctance on the part of financial regulators to pursue the
scandal, as well as the tacit endorsement of the Olympus board by friendly
bankers and Japanese institutional shareholders, has reinforced views among
foreign investors that entrenched executives in Japan are still able to thwart
any attempts at change. The company?s shares have also avoided ? for now, at
least ? a delisting from the Tokyo Stock Exchange, a move that would have
decimated shareholder value.
Mr. Woodford said he had instructed his lawyers to prepare to sue Olympus for
unfair dismissal. The Olympus board has said that Mr. Woodford was let go
because it did not like his aggressive Western management style.
?I got fired and lost my job for doing the right thing, and they?re still
there,? Mr. Woodford said.
He said the strain that his long struggle was putting on his family back in
England, especially his wife, was also a big consideration in his decision to
abandon the fight.
Olympus?s stock market value has dropped by half since Mr. Woodford was fired
in mid-October. Its shareholders? equity has also been exposed as dangerously
low, at just 42.9 billion yen ($556 million) at the end of September, casting a
shadow over the company?s long-term viability. Many foreign investors have said
the current management was tainted and should leave, for the sake of robust
corporate governance.
A fund manager in the United States, Southeastern Asset Management, which holds
about 5 percent of Olympus?s shares and has been an outspoken critic of the
company, previously warned that any attempts by the incumbent board to protect
its own interests ?would deal a severe blow to the reputation of Japan?s
capital markets and corporate governance.? Representatives of the fund manager
were not immediately available for comment.
Top Olympus executives acknowledged in November that the company had indeed
conducted an effort spanning decades to cover up $1.7 billion in investment
losses in a global scheme that has led to investigations by the authorities in
Japan, the United States and Britain.
Investigators are looking into what they say is a scheme that began in the
1990s to hide losses by selling bad assets to funds and other entities and
later settling those losses through payments masked as acquisition fees.
Three executives implicated by an independent panel have left Olympus over the
scandal, but the rest of the board, led by the current chief executive, Shuichi
Takayama ? a former board member who took the helm of the company in November ?
has been scrambling to retain control. Olympus has refused to reinstate Mr.
Woodford or to offer him an apology.
Instead, Olympus is said to be looking to raise capital from domestic
investors, which would dilute the influence of overseas shareholders and make
fundamental changes less likely.
Last month, the Nikkei business daily reported that Olympus might issue about
100 billion yen in new preferred shares, and that Japanese companies like
Fujifilm and Sony might be possible investors. Those two companies, however,
have denied that any such investment was in the works.
Olympus?s biggest lenders, including the Sumitomo Mitsui Financial Group, which
also holds an equity stake in the company, have backed the board. Mr. Woodford
said the bank had refused to meet with him. Sumitomo Mitsui has refused to
comment.
Japan?s system of cross-shareholdings between companies with business ties ?
like companies and their main banks ? means that top executives at Japanese
companies face little pressure from investors to improve performance or bolster
corporate governance.
Trying to beat that system, Mr. Woodford rallied support among Olympus?s
foreign shareholders, setting up a proxy fight with the board. He also lined up
a fresh slate of directors, made up of people he said were ?impressive? members
of the Japanese business community.
The plan, he said, was to present those candidates at a shareholder meeting
that the current chief executive, Mr. Takayama, had promised to hold in March
or April.
But Mr. Woodford said Friday that he had become convinced that even if he won
the proxy fight and returned to the company, the schism between Japanese and
foreign shareholders would make any real turnaround impossible.
?It wouldn?t be healthy,? he said. ?It was that realization that made me stop.?
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