Michael Woodford: Olympus and the $680m mystery
After raising the alarm over a huge, unexplained payment, the British CEO of Olympus was suddenly fired – and now fears for his safety. He tells Nick Clark what he knows
Nick Clark is the arts correspondent of The Independent. He joined the newspaper in June 2007, initially reporting on the stock markets. He has covered beats including the City, and technology, media and telecoms and made the switch to arts in December 2011. He has also contributed articles to the sports section.
Friday 21 October 2011
At the start of this month, Michael Woodford was being feted as the man who could overhaul Olympus and return the ailing Japanese camera maker to its former glories. Just weeks later, the same board that welcomed him with glowing praise fired him after he became a whistleblower, forcing him to flee the country and seek police protection.
In a series of interviews with The Independent, Mr Woodford has this week revealed his concerns for Olympus and his personal safety as he continues to wage his one-man campaign against one of Japan's mightiest companies.
Sipping coffee at a quiet café overlooking the Thames, he outlined the weight of evidence he had built up and the need for the Japanese authorities to investigate. Yet the 51-year-old Briton, who has worked at Olympus for 30 years, knows the battle is only just beginning and a day after the meeting headed to Scotland Yard to seek personal protection.
His phone has been ringing constantly since he returned to the UK at the weekend, pursued by shareholders, journalists, lawyers and advisers in Japan. He has borne the attention with remarkable stoicism, although he admits it has taken a heavy toll on his family life. While Olympus is famous in Britain for its cameras, it also has huge operations in medical, life science and industrial devices. Mr Woodford, who was born on Merseyside, came up through the medical side, joining the KeyMed subsidiary in the UK in 1981.
His inexorable rise saw him become managing director of the division at the age of 30. Fifteen years later he was head of Olympus in Europe, and set about overhauling it. He brought the businesses together, cut costs and made them run smoothly. The entire group was hit hard by the downturn, slumping to a staggering ¥115bn loss in its 2008 financial year – its largest since it started compiling its results. Sales remained in the doldrums and the company decided a radical change was in order.
Mr Woodford was appointed president in February, the first non-Japanese head in the company's 92-year history. Tsuyoshi Kikukawa stepped back and moved to chairman, describing it as "vital" for the company's development. His appointment was also welcomed by shareholders.
"I understand why Japan gets tagged with the 'unique' label; it is one of the most impenetrable cultures for outsiders," Mr Woodford told the British Chamber of Commerce's magazine following his appointment, but said he would not be afraid to challenge the status quo. At the start of October, Mr Woodford was also handed the chief executive role, and the Olympus board hailed the progress he had made.
Yet the rumbling had already started. In July, a niche financial journal in Japan published an investigative piece into deals Olympus had carried out in 2008. The piece, and its follow-up, shocked Mr Woodford. He sent a series of letters to board members asking why the company had paid ¥70bn for three companies, including a mail order skin cream group that did not seem to make much money. He then called in auditors from PricewaterhouseCoopers to investigate a fourth deal, without the approval of the board, to find out why the company had handed over a staggering $680m in advisory fees.
In his sixth and final letter to the board last week, Mr Woodford called for the resignation of Mr Kikukawa, saying he should "face the consequences of what has taken place, which is a shameful saga by any stretch of the imagination". He called the evidence "condemning and inexcusable". Three days later, he was called into an emergency board meeting, where he was not allowed to speak as Mr Kikukawa put to the board that he should have his executive titles stripped. The all-Japanese members voted it through unanimously.
A senior colleague ordered Mr Woodford to hand over his house keys and told the ousted executive that he would need to take the bus to the airport as they had removed his driver.
In a press conference the next day, the board blamed a culture clash for his removal, sending company share prices spiralling lower. Mr Woodford called that charge "nonsense".
Mr Woodford was warned to leave the country by friends who feared there were other forces at work. Even in London, he said he fears for his safety. He has called for the removal of the whole board and for the Japanese police to investigate. He took a dossier of documents, including his letters to the board and the PwC report to the Serious Fraud Office on Monday, as one of the transactions was funnelled through the company's UK arm. He returned with more evidence yesterday.
Olympus's response has threatened him with legal action, which Mr Woodford said he would welcome.
Mr Woodford talks of his desire to safeguard the 40,000 Olympus employees. "I would not want them cut loose," he said. He has received some support from colleagues, although others have reacted angrily. One texted him calling his move to bring the governance issues into the open a "personal vendetta" and asking why he hadn't settled the issue "from the inside of the company".
He denies the issue is personal, and said the governance issues had to be aired for the good of the company. "I would not betray those people at Olympus; many are worried for their jobs and the future of the company," he added.
Mr Woodford said he had no knowledge of the issues and would never have taken the job if he had, although he is not severing all ties quite yet. Technically, he remains an employee of Olympus, and told The Independent earlier this week that he would return if the shareholders ousted the entire board.
The company is beset by a "cancer", Mr Woodford said, referring to Mr Kikukawa's grip as a "regime" and an "emperor system". Yet he believes there is still hope for the company, saying: "If I did go back, and there was a new board, this really could be a new beginning for the company."
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