The other was an Olympus hand of almost half a century, with a decade at the company’s helm, credited with kick-starting its camera business, and long a witness to its ups — and downs.
But when the English president, Michael C. Woodford, confronted the Japanese chairman, Tsuyoshi Kikukawa, last summer over $1 billion in murky payouts and questionable acquisitions Olympus had made during Mr. Kikukawa’s tenure, their worlds clashed.
And so began a boardroom battle that has now cost both men their jobs, wiped out over half the company’s stock-market value — and once against cast a harsh spotlight on seemingly grave lapses of corporate governance at a top-tier Japanese company.
On Wednesday, Mr. Kikukawa, 70, resigned as Olympus chairman, just two weeks after he had publicly fired Mr. Woodford, 51, citing his inability to fit in with Olympus’s Japanese top management team. (“I don’t think he liked Japan,” Mr. Kikukawa wrote in an e-mail he sent to the company’s employees around the world, explaining the firing of Mr. Woodford.)
In a statement Wednesday announcing his own resignation, Mr. Kikukawa said that he regretted “causing concern” to shareholders, but insisted that there was “no corruption” involved in the acquisitions that Mr. Woodford had questioned.
Mr. Kikukawa was replaced by Shuichi Takayama, a managing director of the company, who bowed deeply in front of flashing cameras and promised to “spearhead efforts to restore confidence” in Olympus. But the appointment of Mr. Takayama, who is 61 and a 30-year Olympus veteran, has raised investor questions over whether his long ties to the company and the board can allow him the independence to conduct a comprehensive investigation of the claimed misdeeds.
The Olympus debacle involves charges of money-laundering, false accounting and other fraudulent practices totaling more than a billion dollars — potentially one of Japan’s largest-ever financial scandals.
At the center of the storm are exorbitant fees of $687 million that Olympus paid to now defunct advisory companies for its 2008 acquisition of Gyrus, a British medical equipment maker. Also under scrutiny are hundreds of millions of Olympus dollars that were spent buying three unprofitable start-up companies, only to have Olympus quickly write off three-quarters of their value.
In a hastily called press conference Thursday morning, Mr. Takayama said that the company had thought the multimillion-dollar advisory fee for the Gyrus deal “would pay off.”
But the scandal is also a tale of cultural expectations, dashed on both sides, and a look at an old-school way of doing business in Japan that continues to resist the due diligence and best practices that the corporate West expects as a matter of course.
In some ways, the Olympus episode harks to an older — and more freewheeling — era of Japanese deal-making, before the bursting of the country’s economic bubble in the 1990s and subsequent regulatory reform efforts. Back then, small Japanese shareholders — at times purported to have organized crime links — would threaten to cause ruckuses at corporate annual meetings unless they were paid to be silent. In other cases, companies would pay politicians to secure government business.
But the Olympus scandal is unusual because it follows an era of aggressive government crackdown on bribery and suspicious business deals, said J. Mark Ramseyer, a professor of Japanese legal studies at Harvard Law School. “The activity seems to have gone down quite a bit,” Mr. Ramseyer said.
And yet, other experts cite the Olympus episode as evidence of still-frequent lapses of corporate governance in a country where truly independent board members are still rare, although there’s a requirement that one director or auditor be independent. And still in force, experts say, is a deep-rooted Japanese business culture in which personal relationships can sometimes seem to take priority over generally accepted accounting practices.
Ben Protess contributed reporting from New York.
This article has been revised to reflect the following correction:
Correction: October 27, 2011
An earlier version of this article mistakenly referred to the fees of $687 million that Olympus paid to advisory companies for its acquisition of Gyrus as multibillion-dollar fees.
Article source: http://www.nytimes.com/2011/10/27/business/global/olympus-chairman-resigns-amid-widening-scandal.html?partner=rss&emc=rss
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