takayama

Olympus Executives May Seek to Keep Their Jobs, President Says

Company officers who were not directly implicated in a scheme to cover up past losses should not have to step down, Olympus’s president, Shuichi Takayama, told a press conference in Tokyo on Thursday, appearing to reverse an earlier promise to resign en masse. He also flaunted recent recommendations by a third-party investigative panel that called the management “rotten to the core” and urged the entire board to go.

The reluctance of Olympus’s current management to step aside has caused more investor jitters over the company, which booked a $1.3 billion reduction in net assets on Wednesday as it came clean on hidden losses
. The company also booked a net loss of 32 billion yen for the six months through September.

The big hit on its balance sheets has raised concerns that the company might be forced to sell assets or raise fresh capital, and the company may even be snapped up by rivals or funds, analysts said.

Olympus shares, which had trimmed losses in recent weeks, slumped more than 20 percent on Thursday.

“That is shareholder-repugnant. There’s no way they’re going to accept the current board staying on, particularly foreign investors,” said Nicholas Smith, a Japan strategist at CLSA Asia-Pacific Markets.

“At the moment, the only way they’re getting to vote is with their feet,” he said.

Olympus, the storied maker of endoscopes and cameras, admitted last month to hiding losses on investments in the 1990s with an elaborate scheme involving offshore funds, inflated acquisition payouts and a network of obscure brokers. The authorities on three continents are probing the company’s transactions.

Mr. Takayama said rebuilding the troubled company would require members of the current board to stay on. He said the company would call an extraordinary meeting of its 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 himself would stay on as president to lead those efforts. So far, 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 recommendations made by 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 the company was considering capital tie-ups to shore up its balance sheet, though he offered no clues of possible partners or no further details of a turnaround plan.

It was unlikely, he 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 past finances.

Mr. Woodford, a British national who was one of Japan’s few foreign chief executives, is now seeking a return to the company’s helm with a fresh slate of executives. He has said the existing board had been 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 visiting 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 uncertainties over who will lead the company has undermined investor confidence even as it met a critical deadline Wednesday to announce its second-quarter earnings, clearing a major hurdle to staying listed on the Tokyo Stock Exchange.

The bourse, however, can still delist the 92-year-old company if it deems its transgressions serious enough – a weighty but potentially contentious decision, given past inconsistencies
by the Japanese authorities in metering out punishment for white-collar crime.

Rating Investment Information, the 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 should go.

But some institutional investors in Japan have indicated they stand by Olympus, including Bank of Mitsubishi UFJ, one of Olympus’s largest lenders as well as a top shareholder in the company.

Mr. Woodford has said his own plans for Olympus, should he return, would be to build on investor confidence in fresh management at the company to recapitalize it. He said that he would not support an equity tie-up because that would rob Olympus of its independence.

At a press conference later Thursday, Mr. Woodford blasted Mr. Takayama’s intention to stay on.

“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,” he said.

Yasuko Kamiizumi contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=7b643ce061091bef69575ff4eba7e688

At Olympus, Western Questions for Old-School Ways

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

Olympus Executives May Seek to Keep Their Jobs, President Says

At Olympus, Western Questions for Old-School Ways

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