The ousted British CEO of disgraced Olympus Corp, who blew the whistle on a $1.7 billion accounting fraud, dropped his bid to return to lead the medical device maker, blaming cosy ties between its management and big Japanese shareholders and saying the saga had taken its toll on his family.
Michael Woodford's campaign against its management rocked the once-proud maker of endoscopes and cameras, but failed to win over Japanese institutional shareholders including Olympus' main lenders, who support a board that has been castigated for insufficient oversight.
"Despite one of the biggest scandals in history, the Japanese institutional shareholders have not spoken one single word of criticism, in complete and utter contrast with the overseas shareholders who were demanding accountability," Woodford told a news conference in Tokyo on Friday. The decision by Woodford, who was fired in October after just two weeks as chief executive, leaves foreign shareholders who want a new slate of directors, including US fund manager South-eastern Asset Management, without a champion to lead any proxy battle when the company convenes an extraordinary shareholders meeting as early as March.
"We applaud and respect (Woodford's) actions and regret that he has decided to withdraw. Olympus ... continues to suffer under shoddy corporate governance and an utterly discredited board. We maintain that the board should be replaced and a new board should oversee the company's revival," Josh Shores, Southeastern's Senior Analyst and Principal said in a statement.
Woodford said he would sue Olympus for unfair dismissal and had instructed his lawyers to begin legal action in Britain. Olympus said in October it fired Woodford because he failed to understand the company's management style and Japanese culture. "There are no grounds whatsoever for dismissal," he said.
Woodford, looking calmer than at his last news conference in Japan, where he lashed out at Olympus executives and big Japanese shareholders, called his sacking and later developments an "Alice in Wonderland" situation. "I get fired ... for doing the right thing, and they (current management) are still there," he said. Woodford, who fled to England after his sacking citing unspecified safety concerns, said the trauma suffered by his wife after he went public with his campaign played a major part in his decision to drop his bid to return to Olympus.
"It's been a frightening period for my wife. I cannot put her through any more anguish," he said in a statement explaining why he was abandoning his battle to be reinstated. Olympus is being investigated by Japanese police, prosecutors and regulators and US and British authorities over the scandal, in which the firm used dodgy M&A deals to hide investment losses stretching back over two decades. Woodford said he would meet next week with the UK Serious Fraud Office.
The scandal revived concerns about lax corporate governance in Japan and sparked speculation that organised crime syndicates were involved in the Olympus cover-up. An external panel appointed by the company to investigate the scandal in December issued a scathing rebuke of core management, but found no evidence that gangsters were involved.
The company's main lender and major shareholder Sumitomo Mitsui Financial Group (SMFG) is backing existing management led by CEO Shuichi Takayama, which is seeking a capital tie-up with a rival firm to bolster Olympus' finances. Olympus' net assets are dangerously thin after it corrected its accounts to include the effects of the 13-year accounting fraud.
Shareholder equity was just 42.9 billion yen ($556 million) at end-September, or 4.5 percent of total assets - less than a quarter of what is seen as a healthy cut-off. A 20 percent proportion of equity would imply that it needs to raise about 150 billion yen in fresh equity. Japanese media have reported that Sony, Fujifilm Holdings and Panasonic Corp are among those that may ride to the rescue of Olympus.