For camera companies, 2011 is a year they’d like to forget — natural disasters have wreaked havoc on Japanese manufacturers and delayed many a product launch. But last summer, Olympus suffered a different kind of catastrophe, one that was man-made, but perhaps much more damaging, and which, if the company goes under, could affect consumers who own Olympus devices, such as cameras, audio recorders, or other products. For instance, it may be difficult to send a device back for repairs or replacement if there’s no company to send it to.
The company has been put in jeopardy by some shady accounting practices during its mergers and acquisitions of various medical and science equipment companies over the past several years (possibly even going back into the 1990s).
Here’s a summing up of the scandal: In 2011, the Olympus board in Japan made Michael Woodford, a British executive who was head of the European operations for Olympus, CEO of the company. However, soon after the promotion, Woodford became aware of the apparent illegal accounting maneuvers, which are estimated in the hundreds of millions, if not a billion, in US dollars.
In the fall of 2011, Woodford attempted to have the Olympus board in Japan replaced in order to bring credibility back to the company. He miscalculated, and the board fired him as CEO. As 2011 drew to a close, Olympus’s stock plummeted, the company was in danger of being de-listed from the Japanese stock exchange, a move that would have further damaged the camera maker. Woodford then launched an ultimately doomed attempt to return to Olympus with a brand new board.
Sadly, the New Year has not lessened the severity of the scandal for the venerable camera maker. Woodford still plans to sue Olympus for wrongful termination, and the company itself is suing 19 current and former executives, although, weirdly, it’s letting the president and board members who have not been named in the lawsuit remain in place.
In an email referenced by the New York Times, Woodford stated that not firing the entire board is a mistake.
“It is completely the wrong basis to revitalize Olympus,” Woodford said. “The only way forward is an entirely new board of directors, untainted by the past scandal.”
When I asked a friend of mine who’s knowledgeable about mergers and acquisitions what he thought of the story, he said, “It’s a sh*t storm.” He also pointed out that Japanese companies are very reluctant to make drastic moves, like replacing a board of directors, even though it appears that their lack of action is one of the many reasons the company is still on shaky ground.
But for me, as a reporter who covers the camera industry and as an avid photographer who has tremendous respect for the engineering and design behind many Olympus cameras, I find this story very depressing, since the problems at Olympus have absolutely nothing to do with the company’s camera products.
Terry Sullivan is an Associate Editor at Consumer Reports specializing in cameras and digital imaging.
More From Consumerist
-
Study Says FDA Could Be Doing Better At Publicizing Drug Recalls
-
This Guitar Center Coupon Is Great, Unless You Actually Want To Buy Anything
-
The Origo Won’t Let Smartphone Addicts Start Car Unless Phone Is Inaccessible
-
Chipotle Facing The Investigative Heat Over Its Compliance With Immigration Laws
-
AT&T E-Mails Me Stranger’s Account Statements, Shrugs
you “asked a friend”?!?
this is a new low for the Consumerist.
C’mon, it was a “knowledgeable” friend. Totally different circumstances.
+1
you would think an “associate editor” would know better than to editorialize the end of the story, Just name your friend in your quote and save your personal “depressing” feelings for your personal blog, and the rest of the story is fine. About 3 months behind the news cycle, but fine…
I thought the personal touch, and snark, was what blogging is about. I don’t want blog posts to read like UPI articles.
Consumerist is closer to news source than general blogger. Use of the first person in writing is highly unusual for this website, except in quoting the person who submitted the story or doing a story about Consumerist or Consumer Union/Reports. This is neither.
The inference is that the author’s friend, who is involved with mergers and acquisitions, would know if the acquisitions related to Olympus were weird. And the friend confirmed a fecal typhoon related to the acquisitions.
And as the mergers and acquisition business is by default secretive, I would understand why said friend would not want his/her name mentioned.
I had no idea that Olympus was even still in business.
Really? What make you think that they went out of business? I still see their cameras in most electronic stores I visit.
I’m a big ¬µ4/3 camera fan. However- they optical division that the cameras belong to are small bean compared to the endoscope portion- that’s big bucks for them.
The µ4/3 camera system is a collaboration between Olympus and Panasonic though- and in the even that Olympus decides to sell the optical division, most likley Panasonic or another Japanese optical/camera manufacturer would step in and purchase it (Fuji or Panasonic).
What do they think they are, a bank?
Good on Woodford for seeing that his company was doing something underhanded and trying to do something about it. You don’t see that very often from a CEO.
Wow.
“In interviews, Woodford said he grew concerned after reading magazine stories that questioned acquisitions Olympus made in recent years, notably the November 2007 purchase of U.K. medical-equipment maker Gyrus Group for $1.92 billion. Woodford then discovered that two advisory companies — Axes America of New York and its Cayman Islands subsidiary Axam Investments — received $687 million in fees through cash, warrants and preferred shares. That figure is equal to 36% of the deal’s value. Woodford said a $2 billion deal would normally pay a 1% fee to advisers. At first, Olympus disputed the fee amount, then backpedaled and acknowledged it was accurate.”
Hmmm….Human Greed strikes again.
I don’t know how I missed this situation with Olympus for so long. This is very interesting. I have always owned Olympus cameras and i sell quite a few of them at work, or at least I used to until recently it seemed like everyone was wanting to go with a different manufacturer all of a sudden. Looks like I am the last to know on this one.
I just saw this story today also and was able to read some earlier coverage from October/December. It seems like Woodford may now have the title as “highest placed whistleblower” ever.
Some of his reasoning is spot on though. He is apparently a very methodical and honest leader having implemented alot of standardized practices and processes in his divisions and companies. And for him to have found that Olympus had bought an unrelated business(es) with alot of flaky advisory payouts would have immediately given him concern. Since the company is multi-national, the issues he found would be considered criminal activities in certain countries- including the USA.
He actually sounds like a rare ethical leader who is actually looking out for the shareholders.
“a rare ethical leader who is actually looking out for the shareholders”
And that’s why he had to be fired.
(evil grin)
Hmmmm. I’m impressed by Woodward’s actions.
Sadly, if this were an American company, with an American CEO and Board; I doubt it would have played out the same way.
I think things would be a bit more transparent, though I’m sure the company would’ve still been run into the ground with the BoD making out with large sums of money. But at least we’d be able to see it happen. In Japan, the shroud of secrecy is too great that the public or shareholders won’t know something’s wrong until the company completely folds.
This isn’t terribly surprising given it’s a Japanese company/board of directors. The tendency to save face in the Japanese culture often overrides other decisions that would otherwise save a company from the ultimate disgrace – having to shutter a business. It’s both counterproductive and counterintuitive. But, that’s how things tend to go.
First Kodak, now Olympus. Who’s next, Canon? Nikon? Fuji???
Thinking outsider create Fukushima Daiichi meltdown of Enron-type money hiding practice.
“White collar” crime is the scourge of the earth and by far the most damaging to other people, yet it nearly always goes unpunished as the courts are complicit. Criminals wear suits, not second hand clothing.
If you are that close to the subject, you should not have reported on it.
Oh, the gods are troubled on mount olympus.
I wonder if they are going to change their name to “Hephaestus”?