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Woodford's presidency

On 1 April 2011 British-born Michael Woodford, an Olympus veteran of 30 years, was promoted to the post of president and chief operating officer. Woodford, previously executive managing director of Olympus Medical Systems Europa, replaced Tsuyoshi Kikukawa and became the first ever non-Japanese chairman of Olympus.[18] Six months later (on 1 October), Olympus elevated him to its chief executive officer.[19] At the time of Woodford's appointment, he was regarded as an unlikely choice. Reuters reports there were rumours that he only got the job because he would be "easy to control"; some Japanese observers saw Woodford, who speaks no Japanese, as the chairman Kikukawa's new pet. An article in FACTA underlined the sceptics' views, saying "The fact that the company picked a bottom-ranking foreign executive director with virtually no significant responsibilities from amongst a total pool of 25 potential candidates, including the vice-president who was responsible for medical instruments ... set tongues a-wagging."[20] Woodford's promotion was announced through a press statement without calling a news conference. The press release, which was full of praise for Woodford, mentioned his success in cutting costs and presented him as the "new global face of Olympus".[21] According to Woodford, Kikukawa had reminded him privately upon appointing him president: “I am the one who has the authority to hire and fire, and to decide remuneration for board members and the next tier down of management," thus signalling Woodford was "little more than his puppet".[14] Woodford recalls that there appeared to be "strange goings-on at the company" in 2008 – for example, the Gyrus acquisition ought to have been within his scope but was instead handled from Tokyo. So Woodford set off on a trip to Tokyo to resign, but decided to stay after Kikukawa promoted him to oversee all of Olympus’ European businesses and appointed him to the main Olympus board.[21]

 

“ Woodford himself was soon to realise that his appointment to CEO was in name only. ”
—Nikkei Business 1 November 2011[14]

The company removed him two weeks into the job, due apparently to "differences in managing style".[7] Woodford, however, alleged that his forced departure was linked to several prior acquisitions he questioned, particularly the US$2.2 billion deal in 2008 to acquire British medical equipment maker Gyrus Group.[19] On 30 July Woodford's attention was drawn to a negative article in FACTA that alleged Olympus had made undisclosed payments for a series of acquisitions some of which outside its "core" camera and endoscope business, most notably a sum of $687 million apparently paid to advisers as part of the Gyrus acquisition. Woodford said that he asked Hisashi Mori and some confidants about the FACTA report. Woodford says that at a lunch meeting in August with Kikukawa and Hisashi Mori, Olympus' compliance officer, Kikukawa revealed he ordered staff not to tell Woodford about the allegations because Woodford was "too busy" dealing with other matters. Kikukawa then apparently dismissed the article as "tabloid, sensationalist journalism".[20] Upon learning about a second article referring to payments by Olympus to "anti-social forces", a euphemism for yakuza,[3] Woodford began to write a series of letters to Mori and/or Kikukawa regarding his concerns as to governance issues "relating to the company's M&A activities". There were six letters in all. Woodford copied later letters to the company's auditors, and threatened to resign if he did not receive satisfactory responses about the 2008 Gyrus acquisition costs, and the goodwill impairment of around $600 million made that year for the other acquisitions. According to Woodford, Kikukawa made him CEO to stop him from resigning.[20] The New York Times suggested that the promotion may have been meant to instil Woodford with a greater sense of loyalty to the board.[21] Nikkei Business noted that the announcement was made only in its English web page and queried Olympus; it commented: "Woodford's title had changed from COO to CEO, but it did not signify any real change in the company's leadership. Woodford himself was soon to realise that his appointment to CEO was in name only."[14]



"The eventual cost of the Transaction to Olympus is extremely significant and is as a result of a number of actions taken by management which are questionable and which give cause for concern ... We were unable to confirm that there has been improper conduct, however, given the sums of money involved and some of the unusual decisions that have been made it cannot be ruled out at this stage ... In addition, there are a number of other potential offences to consider including false accounting, financial assistance and breaches of directors' duties by the board."

PriceWaterhouseCoopers report on the 2008 Olympus acquisitions[20][22]

Unbeknownst to the board, and feeling that an internal probe would not get all the necessary answers, Woodford brought in accounting firm PricewaterhouseCoopers (PwC) to give substance to his suspicions.[14][21]

Woodford copied his final two letters to senior members of the Ernst & Young organisation (auditors to Olympus) in Japan, Europe and the United States, as well as its global chairman and CEO. According to a report by PwC, a "success fee" – an intermediary's fee for closing an acquisition deal – of $687 million for the Gyrus acquisition was paid to two small firms, US-based Axes America LLC and Cayman Islands-based Axam Investments Ltd. PwC also examined the transactions resulting in the $600 million write-down.[20]

Kikukawa arrived late to an emergency board meeting on 14 October that he had convened, cancelled the circulated agenda, and asked the board to consider removing Woodford from his post of chief executive. Woodford was not allowed to speak; the motion was carried by unanimously, with Woodford not allowed to vote.[20] That day, to explain the management change, Kikukawa circulated a staff email saying that Woodford had "ignored established decision-making processes and created many wedges among the managers and within the organization ... vastly different to what we had expected of him, which was to accelerate decision-making and speed up the management."[20]

Michael C. Woodford has largely diverted from the rest of the management team in regard to the management direction and method, and it is now causing problems for decision making by the management team.

Hence, judging that realisation of the 2010 Corporate Strategic Plan with its slogan of "Advancing to the Next Stage of Globalisation" would be difficult to achieve by the management team led by Woodford, all the board directors attending today, except for Woodford himself who could not participate in the voting due to special interest, unanimously resolved the dismissal from his office of the representative director"

— Olympus press release: "Olympus Corporation Resolved Dismissal of President Michael C. Woodford"[23]

After Woodford was removed, Kikukawa was re-appointed president and CEO of Olympus.[24] One week later, Kikukawa accused Woodford of having created "a gang" of direct reports that circumvented Mori, his supposed immediate subordinate.[20] Kikukawa resigned on 26 October "to restore confidence in the company under the new management". At the press conference, he declared Olympus to be clean, continued to accuse Woodford of attempting to seize power, and maintained Woodford was "autocratic", and that his alleged offences "included intimidation of my own staff."[20] Woodford said on Bloomberg Television: "The board has to go, they're all toxic, they are all contaminated."[25] On 30 November, Woodford announced that he would resign from the Olympus board, saying that his decision was unrelated to the official investigations in Japan, the UK and the USA.[26] He added that his resignation was necessary in the context, and that he was "committed to ensuring that Olympus has the best possible opportunity to succeed going forward, starting with a new and untainted board of directors."[27]


Date: 2015-01-29; view: 138


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