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.