Updated: April 20, 2012
Olympus Corporation, founded in 1919, is a manufacturer of digital cameras and electronic equipment. Based in Tokyo, the multibillion-dollar company has operations worldwide. In mid-October 2011, Olympus was rocked by scandal when its former chief executive and president, Michael C. Woodford, who is British, was suddenly fired. The company’s chairman, Tsuyoshi Kikukawa, blamed a culture clash, but Mr. Woodford, a 30-year Olympus employee, said he was fired after trying to force an investigation into a series of acquisitions made before he was appointed chief. One of the deals in question involved $687 million in fees Olympus paid to an obscure financial adviser over its acquisition of the British medical equipment maker Gyrus in 2008. That fee amounted to roughly a third of the $2 billion acquisition price, a fee amount more than 30 times the norm. Olympus also acquired three small companies in Japan for a total of $773 million, only to write down most of their value within the same fiscal year. Those companies — Altis, a medical waste recycling company, Humalabo, a facial cream maker, and News Chef, which makes plastic containers — had little in common with Olympus’s main line of business. Those businesses had not made money before being acquired, according to the credit ratings agency Tokyo Shoko Research. At first, Olympus denied any wrongdoing over the deals, which were made from 2006 to 2008. But on Nov. 8, the company admitted it had used $1 billion in payments to cover up losses on investments. By mid-November, according to an internal memo prepared by Japanese police, officials there were trying to determine whether much of the money went to front companies with links to organized crime. The memo said investigators were trying to find out if Olympus worked with organized crime syndicates to obscure billions of dollars in past investment losses, and then paid them exorbitant sums for their services. The company said that all the transactions went toward masking past losses. It denied rumors that it sought the aid of Japan’s notorious organized crime syndicates, known as the yakuza, to help orchestrate the cover-up. But according to the memo, Olympus made payouts amounting to many times the losses it sought to hide, and investigators suspected much of the additional money went to crime groups. On Dec. 6, an outside panel appointed by Olympus issued a harsh report, saying the company’s former management was “rotten to the core.” It also said the accounting fraud involved at least $1.7 billion. The next day, the entire board of Olympus signaled plans to quit over the scandal, setting off a battle for control of the company with Mr. Woodford, the former chief executive who blew the whistle on the cover-up. Olympus’s current board members said they would step down as early as February, but intended to appoint their own successors — something Mr. Woodford said was unacceptable. In early January 2012, Mr. Woodford announced that he would halt his battle to win back his job and overhaul management at the company. In an outcome that may have confirmed foreign investors’ worst suspicions about corporate clubbiness in Japan, Mr. Woodford said he had been unable to garner the support of the company’s Japanese institutional investors and creditors. In February, the Japanese authorities arrested seven central figures in the scandal. Tsuyoshi Kikukawa, a former chairman and president of Olympus, was arrested, along Hisashi Mori, the former executive vice president, and Hideo Yamada, a former auditor, according to a statement from the Tokyo prosecutor’s office. Two former Nomura bankers, Akio Nakagawa and Nobumasa Yokoo, were arrested, as were two of their associates, the statement said. First Shareholders Meeting After the Scandal
At the company’s first shareholders meeting since the scandal, held on April 20, 2012, a new slate of directors easily won approval. The...