In Rare Move, Olympus Fires Its Chief

Shares in the company, which is based in Tokyo, lost nearly a fifth of their value after Olympus said its board had voted to strip Michael Woodford, 51, of his position as president and chief executive.

The Olympus chairman and former chief executive, Tsuyoshi Kikukawa, suggested that a culture clash between Mr. Woodford and the company’s largely Japanese top management had become too disruptive.

But the dismissal also came as Mr. Woodford, a 30-year Olympus veteran who turned around the company’s European operations through aggressive cost cuts, geared up to do the same across the Japanese company.

At a news conference Friday, Mr. Kikukawa implied that Mr. Woodford had gone too far.

“We hoped that he could do things that would be difficult for a Japanese executive to do,” Mr. Kikukawa said. “But he was unable to understand that we need to reflect a management style we have built up in our 92 years as a company, as well as Japanese culture,” he said.

It has been a swift reversal of fortune for Mr. Woodford, who leapfrogged scores of more likely candidates to clinch the top job in February, making him one of a handful of foreigners to run a large Japanese corporation.

The swift dismissal is also rare at Japanese companies, which often retain top executives even when the company is losing money.

At the time of his appointment, Mr. Kikukawa gave him a glowing review, describing the Briton’s loyalty to Olympus as “above the rest.”

Mr. Woodford was also praised as the new global face of a company, like many others in Japan, that had looked overseas to make up for a shrinking market at home.

But in a sign of the headwinds he may have faced at Olympus, Mr. Woodford had described, in an interview with the magazine of the British Chamber of Commerce in Japan, the difficulties of navigating Japan’s closed corporate culture.

“I understand why Japan gets tagged with the ‘unique’ label; it’s one of the most impenetrable cultures for outsiders,” he said in a cover story in the magazine’s October issue.

“Status quo is still very powerful in Japan,” he said. “When you change something, you close something or withdraw from something, you will get resistance based on my predecessor’s decisions, especially when something is seen as sacrosanct or a holy cow.”

Mr. Woodford had taken the helm at Olympus at a tough time. In the year through March, net profit at Olympus fell 85 percent from the previous year to ¥7.4 billion, or $96 million, as losses at its camera division weighed on the company’s profitable medical equipment business. In that year alone, the cameral division lost ¥15 billion, a performance Mr. Woodford had called “unacceptable.”

Those assurances may not have been enough to quell growing unease among his Japanese colleagues, however. Among the differences cited by Olympus were disagreements between top management and Mr. Woodford over restructuring the company’s research and development division.

Still, the plan had given Olympus enough cause to raise its earnings forecast for the year through March 2012 to ¥18 billion, a 140 percent increase from the previous year.

Some analysts swiftly cut their ratings on Olympus following Mr. Woodward’s dismissal. The Japanese investment bank, Nomura, said it no longer expected bold cost cuts or an improvement in earnings in the next fiscal year.

Mr. Woodford’s plight highlights the sway that outgoing executives continue to hold at Japanese companies, often serving as powerful chairman — a practice that makes it difficult for new management to bring about big changes.

That was laid bare at the conference on Friday. Mr. Kikukawa, the chairman, complained that Mr. Woodford would often bypass the heads of company divisions to give orders directly to the rank and file.

Mr. Woodford “ignored our organizational structure and made decisions entirely on his own judgment,” Mr. Kikukawa said. “I told him repeatedly he couldn’t do that, but he didn’t listen.”

Olympus said Mr. Kikukawa would take back his title as president and chief executive. Mr. Woodford will remain a director without representative rights until the next annual shareholders’ meeting, normally held in June, the company said. Mr. Woodford could not immediately be reached for comment.

Mr. Woodford had been part of a small club of non-Japanese at the helm of companies here, including Howard Stringer, the Welsh-born American chief executive of Sony; Carlos Ghosn, the Lebanese-Brazilian president of Nissan Motor; and Craig Naylor, who heads Nippon Sheet Glass.

Article source: http://www.nytimes.com/2011/10/15/business/global/in-rare-move-olympus-fires-its-chief.html?partner=rss&emc=rss