Olympus sues execs over scandal, shares surge

Tue Jan 10, 2012 4:53am EST
 
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By Yoko Kubota and Linda Sieg

TOKYO (Reuters) - Japan's disgraced Olympus Corp is suing its president and 18 other executives, past and present, for up to $47 million in compensation, as it struggles to recover from one of the nation's worst accounting scandals.

The maker of cameras and medical equipment said on Tuesday all board members subject to the lawsuit would quit in March or April, leaving it in the extraordinary position for now of continuing with its most senior executive, Shuichi Takayama, and five other directors it is suing for mismanagement.

One analyst likened the current board to condemned men, resigned to their fate, and said they would have difficulty over the next few months making any strategic decisions, leaving Olympus more vulnerable to an eventual takeover.

"Essentially, everyone feels they are on death row. It does seem extremely strange to have the death row cell inside the company," said Nicholas Smith, head of Japanese equity strategy at CLSA in Tokyo.

"Having nobody at the helm makes it easier for a takeover."

Olympus shares surged as much as 28 percent on the news, with investors betting the company's clean-up efforts would help it avoid a humiliating delisting from the Tokyo Stock Exchange, in turn helping to ensure it stayed on bidders' radars. The stock ended up 20 percent.

Investors also looked forward to the eventual renewal of the board and to Olympus finally drawing a line under a $1.7 billion accounting fraud which has thrown a spotlight on Japan's reputation for weak corporate governance.

Olympus has lost almost half its market value since the scandal erupted in October, when it fired its British boss Michael Woodford, a rare foreign CEO in Japan, for questioning dodgy acquisition deals at the heart of the scandal.   Continued...