Dec. 7 (Bloomberg) -- Olympus Corp. President Shuichi Takayama acknowledged Michael Woodford, the chief executive officer he helped fire, for exposing a cover-up of losses at the camera maker and announced a probe of about 70 executives that may have been involved.
Committees set up by the company will report next month on current and former executives as well as outside auditors, Takayama said. A separate group will advise on revamping management, and shareholders will vote on a new board at a meeting in late February at the earliest, Takayama told reporters in Tokyo today.
Takayama is struggling to regain investor trust in Olympus after admitting that the company lied to investors and auditors about $1.5 billion of losses and as a fourth director quit over the scandal. Shareholders may vote to reinstate Woodford, who was dismissed Oct. 14 by a unanimous board vote as Olympus’s first foreign CEO after he challenged the company’s accounting, Takayama said.
“Woodford did have a dogmatic style, but he also shed light on the issue, and that is something not one of us could do,” Takayama said. “He deserves recognition for doing that.”
Olympus executives had previously asserted that Woodford was fired over a clash of management style.
An independent probe of Olympus’s accounting released yesterday found the 92-year-old company’s senior management was “rotten to the core” and called for all executives involved in hiding losses to be removed. The board didn’t carry out its oversight and the company’s culture created “yes men” who failed to stop managers from spending 135 billion yen ($1.7 billion) covering up losses, according to the report.
May Press Charges
The company may press criminal charges against those involved in wrongdoing, Takayama said. The company would also decide on whether to take action against auditors at KPMG LLP and Ernst & Young LLP’s Japanese affiliates by Jan. 17, Takayama said.
The managers involved with trying to conceal losses weren’t motivated by personal greed, Takayama said today. The executives were instead trying to maintain profit levels on the company’s books, he said.
Olympus plans to release first-half earnings by the Dec. 14 deadline set by the Tokyo Stock Exchange to avoid automatic delisting. The company has shed more than half its market value since Woodford was fired. The TSE said yesterday Olympus remains at risk of being removed from the bourse depending on the scale of the restatement of results.
Olympus fell as much as 9.2 percent to 1,081 yen, the first drop in seven days, before trading at 1,128 yen at the 3 p.m. close in Tokyo.
‘Severe’ Capital Effect
The earnings restatement dating back to 2007 will probably have a “severe” effect on Olympus’s capital, Takayama said. The company, which plans to file the revisions Dec. 14, may eventually form alliances with other companies to help bolster its balance sheet, he said.
Olympus booked 168 billion yen of goodwill at the time of the 2008 purchase of Gyrus Group Plc. The company added 41 billion yen of goodwill when it bought back preferred shares of Gyrus from its financial advisers, it said in October.
Olympus inflated fees paid to financial advisers and overpaid for companies it acquired to increase goodwill on its books, according to the panel report yesterday.
Hisashi Mori, a former executive vice president, and Hideo Yamada, a company auditor, planned to write down the value of the goodwill over years, the report said.
Makoto Nakatsuka became the fourth director at Olympus to stand down over the company’s decades-old cover-up of losses, the company said today.
At least six executives including former chairman Tsuyoshi Kikukawa colluded in cover-ups that started in 1998 when they sought to sidestep mark-to-market accounting rules introduced in 2000, according to findings released yesterday from the monthlong probe commissioned by Olympus.
--With assistance from Ben Richardson in Hong Kong. Editors: Ben Richardson, Dave McCombs
To contact the reporters on this story: Mariko Yasu in Tokyo at email@example.com; Takashi Amano in Tokyo at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Tighe at email@example.com