In the shadow of Olympus, Japan frets about its other scandal
By Tim Kelly
TOKYO (Reuters) - The scandal engulfing Olympus Corp (7733.T: Quote) isn't the only corporate governance hot potato in Japan. Revelations by tissue maker Daio Paper Corp (3880.T: Quote) of management that had spun out of control is adding pressure on Olympus to bare all to an investigative panel it has promised to assuage investor angst.
Mototaka Ikawa, 47, who stepped down as chairman on Sept 16, borrowed 10.6 billion yen ($140 million) from seven Daio subsidiaries, diverting the money to his own accounts, the company revealed Friday in an independent report it commissioned in the wake of revelations about the antics of the founder's grandson.
"Employees viewed the company as belonging to the Ikawa family. The corporate culture was one of absolute obedience and that was the root of the problem, a panel of three lawyers, an independent auditor and a board member said in their report.
It is a conclusion that echoes allegations made by ousted Olympus CEO Michael Woodford who described the regime at the endoscope and camera maker as an "emperor system" under former chairman Tsuyoshi Kikukawa, who held sway there for a decade.
Woodford says he was fired for asking too many questions about past M&A deals. Olympus say he was a bad manager who did not understand the culture of the company.
" It's not just firms with an owning family, but when the boss has been there for a long time, while there can be some positive aspects, it becomes harder to stop them and mistakes are made," said Kengo Nishiyama, an analyst at Nomura Holdings, who is an expert on corporate governance.
The investigators at Olympus, who may be identified this week, will look into $687 million in payments made to a financial adviser for the $2 billion purchase of British medical equipment maker Gyrus in 2008. The payments are at the core of the furor that has wiped out about half the firm's market value in the past two weeks.
Also under the spotlight is the acquisition of three companies in Japan that Olympus, under Kikukawa, later largely wrote off. Continued...