Michael Woodford: Unbowed despite the death threats
The Business Interview: The former Olympus boss is The Independent's Businessperson of the Year in recognition of his fightback after he was sacked for blowing the whistle on the company's dirty secret
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Friday 23 December 2011
Gulp. It's not every interview with a businessman that holds the threat of attack by potential assassins. "If your photographer wants to use Tower Bridge as a backdrop, it's a great view," Michael Woodford says matter-of-factly over the phone. "The police say it's safe enough for me now to go out on to the balcony."
It's an extraordinary thing for a chief executive to say, but then this has been an extraordinary year for Mr Woodford, the recently hired – and then fired – boss of the camera and medical equipment giant Olympus.
The man who, after rejoicing in April at being the first westerner to work his way up to the top of a Japanese corporation, discovered to his horror a few months later a dirty, £950m secret eating away at its heart. The man who, when he blew the whistle on the fraud, learned of potential plots to take his life.
It's in recognition of his courage and spirited fightback that today we name Mr Woodford as The Independent's Businessperson of the Year.
As we now know, Olympus had for years been spending hundreds of millions of dollars in bogus payments for "advisory fees" on bizarre takeovers, including that of Britain's Gyrus medical equipment group. It has since admitted it was covering up for decades-old losses running into hundreds of millions of dollars.
Facing a conspiracy of silence from the board, Mr Woodford, 51, confronted the powerful company president, only to find himself sacked instantly. Since that day in October, he has endured the very real threat of attack and been placed under protection by police in Tokyo and London.
Local reports suggested organised crime – the yakuza – might be involved in the cover-up.
"The fear on the directors' faces, and the un-Japanese brutality of my dismissal gave me no reason to doubt them," Mr Woodford says, his tall frame sprawling across the leather sofa in his flat.
When he was sacked, he knew two things: to keep safe, he had to get out of Japan, fast, and get maximum publicity for his story. He quickly packed, then met a journalist in a shady Tokyo park, where he spilled out his discoveries before hot-footing it to the airport.
"The next morning, I was back at Heathrow. Pretty much the first thing I saw was a newsstand. There was my story on the front page. It was good to be home."
Two weeks ago, when we'd discussed that photoshoot idea, he'd sounded remarkably calm. "The first month was worst," he says. "My wife Nuncy was traumatised. She was waking up screaming, in a trance, at 2am. I'd calm her down, and she would fall into a deep sleep. But I couldn't. Then I'd have to get up to do media interviews first thing in the morning. It was hard."
This drama goes back to July, when, while Mr Woodford was away from Japan on a business trip – about three months into his new job at the top of the company – a local magazine printed allegations of the massive fees payments and referred to certain "anti-social elements" – the mafia. Instead of being warned of the story by his fellow boardroom members back in Tokyo, the first he knew of it was when colleagues from Germany emailed him.
When he returned, he went away for a break at a hot spring with a friend – "a very famous Japanese businessman" – who translated the whole article. "He told me: 'Michael, this is very worrying. It's well sourced – you must be careful.'"
Still, back in Tokyo, nobody at Olympus would talk to him about it, until he secured a meeting with the all-powerful chairman-president, Tsuyoshi Kikukawa, and vice president Hisashi Mori. It was a disturbing conversation.
"In Japan you never show your emotions, but I could see the tension in their shoulders and eyes. I said: 'Why was I not told of this? I've just been seeing investors and clients in New York, Boston, Paris and London and nobody told me! Why?'
"Kikukawa responded that he had given the instructions: 'You are too busy to be told,' he said.
"I said: 'But I'm the guy who signs the accounts! I have to know. Is the report true?'
"'A lot of it is, yes.'"
Mr Woodford asked to talk to Mr Mori without the intimidating presence of Mr Kikukawa. He grilled Mr Mori about why Olympus had paid those outrageous fees. Mr Mori blustered with talk of A-preference shares and other nonsense jargon.
"Then I started to laugh: 'Face cream! Why did we buy a face cream business? Plastic microwavable dishes! Why? And why did we pay such stratospheric sums?' Mr Mori just went silent.
"I asked him: 'Mr Mori, who do you work for?' I thought he might say 'Olympus' or 'You.' But what he said was: 'I work for Mr Kikukawa. I am loyal to Mr Kikukawa.'"
It was to be the theme for all his dealings with the Kikukawa-appointed board. Mr Woodford went on to write six letters to the directors. The last few he copied in to the senior partners of Olympus' auditors Ernst & Young in Japan, Europe and the US. Finally, he commissioned a full inquiry by PwC which confirmed his concerns. Instead of acting on them, the board continued to stonewall. Then, in October, Mr Woodford took the bullet train out to an Olympus-funded charity project in the tsunami-hit Tohoku region.
"Awful, awful devastation," he remembers. "The whole, vast coastal area: villages, towns, completely and utterly flattened."
It was a harrowing visit, which made the trouble back in Tokyo pale into insignificance. But on his return that night, he sent the sixth and final letter to the board and, the following day, was summoned to an emergency board meeting. It was, he knew, to be his sacking.
The meeting began, he says, at 9.07am and finished at 9.15am. Then, he was stripped of his company credit cards, told to vacate his apartment, hand over his computers and get a bus to the airport. He recalls: "[Executive officer] Hiro Kawamata came over to me. He says: 'Can we have your phones?' I give him the Japanese one, which I'd already wiped to protect the colleagues who'd been contacting me.
"'Your other phone?' he says.
"That was when I got angry, pumped up. I walk over to him, all threateningly, with the iPhone in my hand, and say: 'My wife will be worrying about me. Are you going to take it off me?'"
As he describes this scene, Mr Woodford charges out of his sofa and towers over me in role play – all six-foot-something of him. I'll just say this: I'm glad I'm not Hiro Kawamata. "I don't know, but I just got so angry. Perhaps it was my Liverpudlian training," he chuckles as he sits back down.
Whenever he's pressed on how he's retained his mental strength through the past three months, Mr Woodford's talk returns to Liverpool.
Here's why: "I grew up in a middle-class home in Staffordshire. My father was an electrical engineer and a brilliant photographer. I remember we always had classical music on in the house. Lots of books. But that all ended when I was seven and my parents divorced. Suddenly, I was in Liverpool living with my mother."
Home became a terraced house ("like Coronation Street") without even an inside toilet or bath. "You had to go to the public baths to wash.
"I was on free school meals, had a second-hand blazer. All from being a middle-class boy. It made me realise how uncertain and vulnerable life is. But I think it also taught me about resilience."
School was King David's High. It was Jewish, but had to take a 25 per cent portion of gentiles like Mr Woodford. That led to some fairly comedic racism. Mr Woodford has slightly Asiatic features, inherited from his mixed-race grandmother. Tough kids at the local comprehensive would mock him for being both Asian and Jewish.
He mentions that teasing when recalling his fury last month when Mr Kikukawa told Olympus staff their ousted chief executive had never liked Japan. "It made me so furious. It was so ridiculous to suggest that I could be racist like that," he says. "I love Japan. It's a super country, a fascinating society and I have many Japanese friends."
But it wasn't the most unpleasant part of the Olympus saga. The worst, apart from the obvious worry for Nuncy, his Spanish wife, and children Edward, 18, and Isabel, 16, has been the reactions of people he used to consider to be friends.
"Many of them have been wonderful. But some chose to stand back. In Japan, Germany and Southend [where the Woodfords live near the UK base of Olympus]. That is very hurtful. All it would have taken was a text of support to me or Nuncy. Some of them were people where the relationships were intimate and close."
I next speak to Mr Woodford hours after his return to London from a whirlwind world tour. He's campaigning to get himself reinstated with a new board of trusted allies to turn the company around. It's an uphill struggle. Japanese shareholders appear to be closing ranks to shut him out.
Olympus said that it had established an independent committee to look into the matter. "A reform process started which is in full swing," the company said.
Mr Woodford sounds jetlagged, but still resolute, punchy. "I did a televised debate in Japan on Wednesday night, outlining my ideas for the company. They had a vote at the end: I won 76 per cent! I got them onto my side! Isn't that great?"
It reminds me of something his old boss, who hired him when he was a 21-year-old Cadbury's salesman, told me. Albert Reddihough was the head of Keymed, later to become the UK division of Olympus.
"When I retired, I recommended to the Olympus board that Michael should be my successor," Mr Reddihough says. "But they dismissed the idea because of his age – he was only 29. So I sent him to Tokyo to give a presentation to them. He impressed them so much, they gave him the job."
Given what the board has put him through lately, Olympus's shareholders should do the same in the new year: Vote for Woodford.
Snapshot: How it unfolded
April 1 Michael Woodford, former head of Olympus Europe and the company's US surgical division, becomes chief executive.
July 10 Japan's Facta magazine alleges Olympus paid fraudulent advisory fees and has potential links to organised crime.
September 23-October 11 Woodford repeatedly writes to the board demanding answers; commissions PwC to investigate.
October 14 Woodford is fired and stripped of his company belongings. He goes public.
November 8 Olympus admits to the scandal.
November 24 Board chiefs Tsuyoshi Kikukawa and Hisashi Mori resign. The remaining board members say that they will follow suit in 2012.
December 1 Woodford launches fight to be reinstated, with the backing of some western shareholders.
December 14 Woodford criticises Japanese shareholders for not supporting him.
December 20 Olympus reportedly plans to sell stakes to rivals Fuji and Sony, diluting power of Woodford's allies.
December 21 Authorities raid Olympus offices.
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