With new board, Olympus looks to draw a line under scandal

Thu Apr 19, 2012 2:31pm EDT
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By Tim Kelly

TOKYO (Reuters) - Peering from a hotel window 50 floors above Japan's bustling capital, Michael Woodford eyes the Olympus Corp building where he was fired six months ago. To the right, he sees the flat he had to quit that day before he was told to take a bus to the airport.

Olympus (7733.T: Quote), a camera maker and the world's biggest manufacturer of endoscopes used for internal medical examinations, sacked its British CEO after he queried staggeringly high advisory fees paid in past acquisitions. In the weeks that followed, regulators uncovered a $1.7 billion accounting fraud stretching back over more than a decade.

The scandal, one of the worst to stain Japanese business in decades, was expected to shake up a deep-rooted local culture where critics say corporate governance is lax.

At an extraordinary meeting on Friday, which some hope will draw a line under the scandal, shareholders led by big Japanese institutions, the company's lenders, suppliers and customers are expected to approve new management put forward by the current, disgraced, board, all 11 of whom are standing down.

ISS Proxy Advisory Services has urged investors to reject Olympus' restated accounts and vote against two men nominated to lead the business out of disgrace.

The company's new president is likely to be Hiroyuki Sasa, an Olympus insider. The nominated chairman is Yasuyuki Kimoto, closely tied to Sumitomo Mitsui Financial Group (SMFG) (8316.T: Quote), a major creditor. Woodford says neither is up to the task of returning Olympus to financial health. The company has forecast a $410 million loss for the year just ended.

Sasa, currently director of medical systems, "has not run a large operational business, the Americas or Europe," Woodford said. "Olympus has 40,000 employees, he was running the marketing department."

"They are putting a banker in as chairman who will represent the interests of the bank. What does he know about healthcare?" said Woodford, seated on a plush sofa with copies of his just-published Japanese book, "Terminated", stacked neatly on a table behind him.   Continued...

A customer looks at a digital camera next to an advertisement for Olympus Corp at an electronics store in Tokyo in this April 10, 2012 file photo. REUTERS/Yuriko Nakao/Files