In Japan the phrase 'corporate governance' is very often an oxymoron. Too many corporations are not so much governed in any truly accountable way; they are instead the personal playground for a core of professional managers, coddled and encouraged by complacent board members and indifferent shareholders.
This is the case of the burgeoning scandal surrounding the Olympus Corporation, maker of the famous digital camera. Is it possible that this venerable corporation, founded in 1919, will go the way of Barclays Bank in 1995? Perhaps, except, in this case, nobody has yet been able to put the finger on the 'rogue trader' behind the mess.
The scandal had been bubbling along since 2008, when Olympus made three questionable acquisitions of companies that had no relationship with the company’s core business interests, which involves not just cameras but a considerable range of medical optics. Its lock on the endoscope business is about the only profit center in the company, which of late has branched out into unrelated businesses.
Then the company acquired the British Gyros Group, which, if nothing else, at least was a maker of medical equipment, making it a plausible purchase. What raised eyebrows was the $687 million fee paid out to two virtually unknown investment brokers headquartered on the Cayman Islands. It amounted to about a third of the total acquisition price.
This astonishing figure, of course, was not revealed in any company documents. It came out only after the British chief executive Michael Woodford, 51, sought an independent audit from Price Waterhouse Cooper, which revealed the exorbitant figure. He was fired as president of Olympus on Oct. 14, breaking the story wide open.
Initially, Chairman Tsuyoshi Kikukawa admitted paying a fee of approximately $300 million, but later the company conceded that the figure provided by Woodford was accurate. The company still maintained that such a fee was 'reasonable' and that Woodford had been terminated for being culturally insensitive.
The Olympus debacle, plus several other corporate scandals this past summer, has raised questions about corporate governance in Japan that many had thought had been answered in previous reforms. They include the role of the press in uncovering corruption in the business world, the use of foreign executives in top positions, the role of boards and the influence of gangsters.
Woodford was not the first foreigner to head a major Japanese company. Carlos Ghost, a Frenchman, has long had a successful run as chief executive at the Nissan Automobile Co., and an American, Howard Springer, has been the head of Sony for six years. They have survived despite hard economic times that have sent profits tumbling.
But Woodford was not the same as these two outside executives, who were both specifically brought in at the top for their experience as global executives. He was a career Olympus man who entered employment, like any other recent graduate, after leaving college (albeit mostly working in the company’s United Kingdom affiliates). It would appear that in Japan a foreigner is forever an 'outsider' no matter how long he has worked for the company.
