Officers and board members who were not directly implicated in a scheme to cover up past losses should not have to step down, the president, Shuichi Takayama, said at a news conference here, appearing to reverse a promise that management and directors would resign en masse.
Mr. Takayama’s position flouts recent recommendations by a third-party investigative panel, which called the Olympus management “rotten to the core” and urged the entire board to go.
The reluctance of management to step aside has increased investor apprehension about Olympus, which booked a $1.3 billion reduction in net assets on Wednesday as it accounted for the previously hidden losses. It also booked a net loss of 32 billion yen, or $412 million, for the six months through September.
The loss has raised concerns that the company might be forced to sell assets or raise fresh capital, and that it might even be taken over by rivals or funds, analysts said.
Olympus shares, which had trimmed losses in recent weeks, slumped by more than 20 percent on Thursday. “That is shareholder-repugnant,” said Nicholas Smith, a Japan strategist at CLSA Asia-Pacific Markets. “There’s no way they’re going to accept the current board staying on, particularly foreign investors.”
Olympus, which makes medical endoscopes as well as cameras, admitted last month to hiding losses on investments in the 1990s with an elaborate scheme involving offshore money, inflated acquisition payouts and a network of obscure brokers. Regulators and law enforcement authorities on three continents are investigating.
Mr. Takayama said rebuilding the company would require members of the current board to stay. He said the company would call a meeting of shareholders in March or April, where some directors could seek reappointment.
“The current directors are imperative for a solid turnaround,” he said.
Mr. Takayama did not deny that he would continue as president to lead those efforts. Only a few directors have quit after being implicated in the cover-up, including the former chairman and a former executive vice president. Asked why the company would not follow the recommendations of the investigative panel, Mr. Takayama said he felt the guidance was open to interpretation.
“I think there is some wiggle room in whether or not everyone must be replaced at once,” he said.
He also said that Olympus was considering new sources of capital to shore up its balance sheet, though he offered no clues of possible partners and no more details of a turnaround plan.
It was unlikely, Mr. Takayama added, that he or his colleagues could find a way to work with Mr. Woodford, who was fired unanimously by the board in October after blowing the whistle on Olympus’s finances.
Mr. Woodford, a British national who was one of Japan’s few foreign chief executives, is seeking to lead the company again with a fresh slate of executives. He has said the board was tainted in the scandal and has no right to choose its successors.
Mr. Takayama said he had no plans to meet Mr. Woodford, who is in Japan to rally shareholder support for his return bid. “Unfortunately, I have doubts about whether we can work together with Mr. Woodford,” Mr. Takayama said, citing what he said was a combative stance by the ousted chief executive.
Olympus’s frail finances and uncertainty over who will lead the company have undermined investor confidence even as it met a critical deadline on Wednesday to announce second-quarter earnings, clearing a major hurdle to avoiding a delisting by the Tokyo Stock Exchange.
The exchange, however, can still delist Olympus, which is 92 years old, if it deemed the transgressions serious enough. Doing so would be a weighty but potentially contentious decision, given inconsistencies by the Japanese authorities in punishing white-collar crime.
Rating and Investment Information, a Tokyo-based credit research company, said Wednesday that it was slashing its rating of Olympus two levels to BBB-, just one notch above investment grade, with a view to a further downgrade. It said that equity capital had “eroded more than expected” and that there was a possibility of additional losses from shareholder lawsuits.
The company has withdrawn its earnings forecasts for this fiscal year, citing uncertainties ahead.
The verdict on who will lead Olympus will come down to shareholders. Southeastern Asset Management, Olympus’s biggest overseas shareholder, has insisted that the current board go.
But some institutional investors in Japan have indicated they stand by Olympus, including Bank of Mitsubishi UFJ, one of Olympus’s largest lenders and a top shareholder.
Mr. Woodford has said that, if he returned to Olympus, his plan would be to build on investor confidence in fresh management at the company to recapitalize it. He said that he would not support selling stakes to other companies because that would rob Olympus of its independence.
At a news conference Thursday, Mr. Woodford criticized Mr. Takayama’s intention to stay.
“Should that man be the president and custodian of one of Japan’s iconic companies?” he said. “How dare he!”
“It would scare away investors all over the world,” Mr. Woodford said.
Yasuko Kamiizumi contributed reporting.
Article source: http://feeds.nytimes.com/click.phdo?i=7b643ce061091bef69575ff4eba7e688
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