A company in turmoil is never a pretty sight. But few corporate crises are as ugly -- and strange -- as the one afflicting Olympus Corp.
Olympus is a global brand, but its company usually doesn't make headlines. Over the years, most of us have bought at least one of its cameras, binoculars or digital voice recorders, without much thought to its executives and board. All that changed last week, when the firing of the company's CEO only two weeks into the job precipitated what is surely the biggest crisis in the Japanese company's 92 years.
The drama to date has had a Michael Clayton element to it. And, it appears nowhere near finished. Olympus' revenue had fallen for three straight years so that its fiscal 2010 revenue was three quarters of the 2007 figure. To counter a slump in consumer products, Olympus had expanded aggressively into medical and life-science equipment, which now make up more than half its net profit.
In February, Olympus promoted Michael Woodford from head of European operations to company president. On Oct. 1, Woodford was also named CEO, taking over both positions from Tsuyoshi Kikukawa, who became the board's chairman. At first, Woodford was cast as an executive who could strengthen Olympus' global presence. He had a 30-year working relationship with Kikukawa, and the two men openly praised each other. Woodford called Kikukawa "radical and adventurous" with a "determination for drastic change." Plus, he said, the two men shared the same sense of humor.
Neither man is laughing today. Last Friday, Woodford went to Olympus' board to demand Kikukawa's resignation as chairman, citing serious governance concerns. The meeting lasted 10 minutes, seven of which were spent waiting for Kikukawa to arrive. Then, 14 of the 15 board members voted to fire Woodford as president and CEO (although he remains a director). The 15th, Woodford himself, wasn't allowed to speak at the meeting. But he has spoken since -- loudly and repeatedly.
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.
