Olympus battle continues
15 December 2011 09:54
The president of scandal-battered Olympus has hinted that business partnerships may be sought to shore up the gaping hole that the huge investment losses it hid for years have left on its balance sheet.
Olympus met its deadline on Wednesday to avoid being removed from the Tokyo Stock Exchange by filing correct earnings for the April-September first half and for the past five fiscal years.
The alleged deception at Olympus, dating back to the 1990s, to hide 117.7 billion yen (£960 million) in investment losses came to light when former president and chief executive Michael Woodford blew the whistle, questioning expensive acquisitions and exorbitant fees for financial advice.
Mr Woodford, a 51-year-old Briton and a rare foreigner to lead a major Japanese company, was fired in October after confronting Olympus directors. He is meeting investors and other stakeholders this week to attempt a comeback, and is demanding that the entire board, including president Shuichi Takayama, resign.
The battle over who will lead the camera and medical equipment maker - embroiled in one of Japan's worst corporate scandals - could come to a head at the next shareholders' meeting. Mr Takayama said that might be in March or April.
"Capital adequacy ratio is a big problem, and we are considering how we can overcome it," Mr Takayama said. "We are considering various options, including a capital tie-up and operational or sales tie-ups."
Olympus appointed three outsiders to a new reform committee to beef up governance and present a plan to shareholders. The committee is in addition to an earlier panel announced by Mr Takayama, which is investigating the scandal.
The company's loss of 32.3 billion yen (£267 million) for the first half of the fiscal year, through September, a reversal from a 3.8 billion yen (£31 million) profit the same period a year earlier, was mainly from the economic downturn and losses from Thai flooding, Mr Takayama said.
Mr Woodford said he was opposed to tie-ups and had better ways to get capital for Olympus to shore up its battered balance sheet. He promised not to break it up or seek a partner, which may reduce its independence.
"I am very fearful of the current management working with parties to look for strategic alliances, which would mean in the end the loss of our independence," he said.
"Because of the strong cash flows and profitability of the medical business, we could raise funding from additional sources without losing our sovereignty."
Olympus should focus on core businesses - medicine, microscopes, industrial products and cameras and other consumer products - and stop acquiring unrelated companies, as it had in recent years, he said.
Mr Woodford said he was talking with investors and many "influential people in the Japanese establishment" to line up support for his return at the top. He declined to give specifics, saying the discussions were "delicate".
It is still unclear if Woodford will manage a comeback. Some people, such as former board member Koji Miyata, see him as a hero and have begun an online campaign to bring him back.
The scandal has prompted soul-searching in Japan on living up to global standards in governance.
Some experts say laws need to be updated, corporate boards need more outside members and transparency needs to be strengthened. Ruling and opposition legislators met Mr Woodford earlier this week to hear his ideas about better corporate practices.
No one has been charged in the scandal, but Olympus management have said several top company men were involved in the scheme and have promised to investigate 70 officials, including former and current executives and auditors, to pursue possible criminal charges.
A third-party panel set up by Olympus, including a former Japanese Supreme Court judge, released the findings of an investigation earlier this month, which said top executives who were "rotten to the core" had orchestrated the accounting cover-up spanning three decades.
The fees for financial advice and overvalued acquisitions were part of an elaborate deception utilising overseas banks and several funds to keep the massive losses off the company's books, according to Olympus.
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