Skip to main content

Woodford: Nothing has changed in Japan Inc. since Olympus saga

By Paul Armstrong, CNN
November 27, 2012 -- Updated 0820 GMT (1620 HKT)
  • Michael Woodford fired as Olympus CEO after he exposed a $1.7 billion cover-up
  • Woodford was appointed as first foreign CEO when a local magazine broke news
  • Olympus shares lost around 80% of their market value in weeks after
  • Woodford: Case highlights the dysfunctionality of corporate Japan

Hong Kong (CNN) -- When CEO-turned-whistleblower Michael Woodford exposed a $1.7 billion cover-up of losses at Olympus, he was forced to flee from Japan, fearing for his life, as the scandal sent shockwaves through the country's tight-knit corporate world.

The 52-year-old Briton had barely settled in to his new role as the company's first foreign chief executive when he became aware of a potentially explosive magazine article.

FACTA, a local Japanese title with only nine staff, had published a detailed expose in July 2011 questioning exorbitant fees it claimed the camera and medical equipment maker had paid consultants for a 2008 acquisition deal. It also questioned extravagant purchase prices of three small companies.

Read: Olympus drama -- A boardroom novel

"The company had bought three 'Mickey Mouse companies' for a billion dollars: a plastic plates company for microwaves, a cosmetics company -- a face cream company -- and a recycling company, but with no turnover," Woodford told CNN Tuesday, as his new book about the saga, "Exposure," prepared to hit bookshelves.

Former Olympus executives arrested
Ousted Olympus CEO makes comeback
Olympus issues an apology of sorts

"They then paid $700 million dollars in fees to somebody, we didn't know who, in the Cayman Islands. I begged and begged and pleaded 'don't treat me as a gaijin (foreigner), treat me as a colleague who cares about this company.' But they didn't listen, not one of the 14 (board members), including three non-executive directors."

Read: New Olympus boss under scrutiny

Instead Woodford quickly found himself out of a job after he attempted to get some answers from then-Chairman Tsuyoshi Kikukawa and former Executive Vice President Hisashi Mori. The board voted unanimously to fire him from the post.

Shigeo Abe, publisher of FACTA, gave his own blunt assessment of why Olympus had selected what he called a "bottom-ranking foreign executive" from 25 candidates to be CEO in the first place. "Mr. Kikukawa's aim was to keep the fraud in secret under the foreign president because Mr. Woodford could not speak and read Japanese," he told CNN last year.

Woodford refused to go quietly, choosing instead to unleash a firestorm of publicity that would prove costly to the board and company itself. Kikukawa and several other board members were eventually forced to resign, while Olympus shares lost around 80% of their market value in the first weeks after news of the scandal broke.

A special audit of Olympus in December last year, led by a former Japanese Supreme Court judge, published a report that blasted Kikukawa's controlling style and the company culture that allowed losses to be disguised in dubious fees and overvalued payments for its acquisitions. "The management was rotten to the core, and infected those around it," the report said. The case also raised questions about the level of transparency in Japan Inc. when to comes to business practice generally.

In September this year, Kikukawa, Mori and another senior executive, Hideo Yamada, admitted filing false reports and inflating the company's net worth. The men could face up to 10 years in prison and fines of up to 10 million yen ($128,400), Japanese media reports have said.

Japan is losing it. The companies and country can't change ... It's desperately sad.
Michael Woodford

"It was an incredible story," said Woodford. "It illustrated the dysfunctionality of corporate Japan and the way the capital markets work.

"A month after I was dismissed, the share price of Olympus had fallen by 81.5% -- $7 billion dollars had been struck off the value of the company, yet the institutional shareholders in Japan would not offer one word of criticism of the incumbent board, or one word for the ex-president in support of him trying to expose this fraud."

But almost a year after he was forced out of the company he had served since the 1980s, Woodford says no lessons have been learned from the scandal by corporate Japan.

"Nothing has changed," he said. "The ruling party, the DPJ, at the height of this said they were going to put forward a recommendation that one non-executive director should be a minimum requirement under Japanese company law.

"In July of this year, the Ministry of Finance dropped that proposal, so out of the 1,600 companies on the Nikkei, over 1,000 don't have one outside director. What are they scared of? What does that tell investors who are looking at Japan?"

Woodford compared the success of South Korean electronics giant Samsung to that of ailing Japanese rivals such as Sharp, Sony and Panasonic -- all have their debts set at junk status.

"Japan is losing it," said Woodford. "The companies and country can't change. They just can't change themselves. It's desperately sad."

Part of complete coverage on
June 17, 2014 -- Updated 1206 GMT (2006 HKT)
London is promoting its tech stars to shows it can compete with Silicon Valley. Here are five companies to watch.
June 18, 2014 -- Updated 1222 GMT (2022 HKT)
It's not easy being Jordan and it is about to become even more difficult, again.
June 18, 2014 -- Updated 1502 GMT (2302 HKT)
At the last football World Cup, it was all about 3D. This time around, it's nothing less than 4K.
June 5, 2014 -- Updated 1416 GMT (2216 HKT)
Bob Mazzer has photographed inside London's Tube network for 40 years. He's captured history.
June 13, 2014 -- Updated 1529 GMT (2329 HKT)
Iraq produces 3.3 million barrels per day and has the world's fourth-largest oil reserves. But the current crisis is putting all this in danger.
June 18, 2014 -- Updated 1222 GMT (2022 HKT)
Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
June 16, 2014 -- Updated 1314 GMT (2114 HKT)
The gas standoff between Russia and Ukraine could have a knock-on effect on Europe. Explore this map to find out why is the EU nervous.
June 5, 2014 -- Updated 1416 GMT (2216 HKT)
Bob Mazzer has photographed inside London's Tube network for 40 years. He's captured history.
June 17, 2014 -- Updated 1206 GMT (2006 HKT)
The UK capital promotes its tech stars and shows it can compete with Silicon Valley. Here are five companies that pitch to make it big.
June 3, 2014 -- Updated 0956 GMT (1756 HKT)
Banksy has condemned an exhibition of his work after organizers defended their decision to remove his art from public spaces.
June 3, 2014 -- Updated 1029 GMT (1829 HKT)
As debate rages over whether Banksys should be for sale, we direct you to the ones you can still see on the streets.
June 2, 2014 -- Updated 1338 GMT (2138 HKT)
While Ukraine's fight for freedom gets bloodier by the day and Russia faces the West's cold shoulder, one oligarch is using art to get his message across.
May 30, 2014 -- Updated 2114 GMT (0514 HKT)
Index on Censorship's Jodie Ginsberg argues the "right to be forgotten" decision is too woolly.
May 29, 2014 -- Updated 1613 GMT (0013 HKT)
Andy McNab says being a psychopath makes us better at business, life and love. Could he be right?
May 28, 2014 -- Updated 1720 GMT (0120 HKT)
Google has revealed a prototype of its latest driverless car -- and this one doesn't even have a steering wheel.
May 30, 2014 -- Updated 1024 GMT (1824 HKT)
CNN's Nina dos Santos speaks to the mothers of successful children and asks them: What's the secret of bringing up a winner?
May 26, 2014 -- Updated 1613 GMT (0013 HKT)
Far-right and far-left parties across Europe caused a political "earthquake," with a string of victories in voting for the European Parliament.
May 26, 2014 -- Updated 1623 GMT (0023 HKT)
CNN's Fionnuala Sweeney speaks to Mihaela Carstei about the $400B gas deal recently struck between Russia and China.
May 21, 2014 -- Updated 0818 GMT (1618 HKT)
The EU is struggling to identify its vision after financial crisis. The European elections are key, and Nina dos Santos says the union needs a new vision.
May 26, 2014 -- Updated 1135 GMT (1935 HKT)
CNN's Nina Dos Santos sits down with Elon Musk's mother Maye, who tells her the story of her family and their success.
May 7, 2014 -- Updated 1410 GMT (2210 HKT)
Boko Haram attacks have shifted the focus at the World Economic Forum hosted by Nigeria, CNN's John Defterios explains.
May 20, 2014 -- Updated 2219 GMT (0619 HKT)
Russian oligarch is set to lose half his wealth after being ordered to pay his former wife $4.5 billion in a divorce settlement.
April 2, 2014 -- Updated 1324 GMT (2124 HKT)
China's ultimate goal is to reach a wide-ranging trade agreement with the EU. The EU hopes to persuade China to open its markets.