Japan's disgraced Olympus Corp is suing its president and 18 other executives, past and present, for up to $47 million in compensation, as it struggles to recover from one of the nation's worst accounting scandals.
The maker of cameras and medical equipment said on Tuesday all board members subject to the lawsuit would quit in March or April, leaving it in the extraordinary position for now of continuing with its most senior executive, Shuichi Takayama, and five other directors it is suing for mismanagement.
One analyst likened the current board to condemned men, resigned to their fate, and said they would have difficulty over the next few months making any strategic decisions, leaving Olympus more vulnerable to an eventual take-over. "Essentially, everyone feels they are on death row. It does seem extremely strange to have the death row cell inside the company," said Nicholas Smith, head of Japanese equity strategy at CLSA in Tokyo.
"Having nobody at the helm makes it easier for a take-over." Olympus shares surged as much as 28 percent on the news, with investors betting the company's clean-up efforts would help it avoid a humiliating delisting from the Tokyo Stock Exchange, in turn helping to ensure it stayed on bidders' radars. The stock ended up 20 percent. Investors also looked forward to the eventual renewal of the board and to Olympus finally drawing a line under a $1.7 billion accounting fraud which has thrown a spotlight on Japan's reputation for weak corporate governance.
Olympus has lost almost half its market value since the scandal erupted in October, when it fired its British boss Michael Woodford, a rare foreign CEO in Japan, for questioning dodgy acquisition deals at the heart of the scandal. "The plan is for the current board members who were found responsible and are subject to lawsuits to complete passing on their roles to avoid any impact on business implementation, and all resign at an extraordinary shareholders' meeting that is set to be held in March or April," Olympus said in a statement.
Six of Olympus' 11 directors are being sued: five of its eight internal directors and one of three external directors. Woodford, who went public with his concerns after his sacking, said last week he was abandoning a bid to be reinstated to his old job, lashing out at big Japanese shareholders for their failure to back his bid. Also among those being sued by Olympus are former Chairman Tsuyoshi Kikukawa, former Executive Vice President Hisashi Mori and former internal auditor Hideo Yamada.
An outside investigative panel found last month that this trio had played leading roles in a 13-year scheme to hide losses from Olympus investors. Former presidents Masatoshi Kishimoto and Toshiro Shimoyama were also included in the lawsuits. Olympus is seeking up to 3.6 billion yen ($47 million) in damages, with Kikukawa, Mori and Yamada being targeted for the largest amounts.
Shimoyama, who was president from 1984 to 1993, when the firm made many of the securities investments that later turned sour, declined comment, saying he had not seen the lawsuit. Olympus said President Takayama had no public comment at this point and others could not be reached. Olympus' decision to sue follows a report by a separate panel appointed by the firm to look into who was to blame for the scandal. The panel said the 19 current and former executives bore various degrees of responsibility.
Some big Japanese investors resisted Woodford's campaign to be reinstated. They said very little publicly, but investment bankers say they were uncomfortable with the Englishman's combative style and also his plans to recapitalise the company through private equity or a rights issue.
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