Oh Olympus, you’re supposed to be in the news for developing exciting camera technology, not for sacking your newly appointed British CEO, issuing contradictory statements about financial transactions, behaving in a way that could generally be perceived as a bit unusual, and seeing your share prices drop by 40% because of it all. But that, in a nutshell, is what’s happened. And it has all happened very quickly. So here’s a potted history of the Japanese camera giant, the British CEO, and the alleged financial irregularities.
Just over two weeks ago Michael Woodford was appointed CEO of Olympus. He was already the company’s President and he’d worked for them for over 30 years. So when they sacked him on Friday, citing a cash of management styles, it seemed a bit, well, odd. I mean, you might think that they’d have known how he operated after so long with them, wouldn’t you? And if his management style were so problematic, how had he managed to rise so high and then be appointed CEO? Perhaps something else was going on?
According to Woodford, yes, something else was going on. And it was very odd. Woodford had noticed some accounting irregularities and asked auditors PriceWaterhouseCoopers to take a closer look. He’d spotted that a payment made to a Cayman Islands-based company as part of the take-over deal of Gyrus (a medical imaging company) was on the excessive side. According to Woodford, it’s usual to pay a fee of 1 or 2% of the total sale price to the broker when a takeover happens. Olympus paid about $2billion for Gyrus, and around $675m in fees to the mysterious Cayman Islands company. So in this instance the fee paid was 36%; he thought that this deserved investigation.
It seems that everyone else at Olympus wasn’t quite so convinced that it needed further investigation and maybe this was the clash of management styles to which they were referring, rather than that he’d uncovered something that he shouldn’t have? Sort of like, not washing the company’s dirty linen in public. Whatever, Woodford was summarily dismissed, told to hand over the keys to his flat (of which he owned 51%), and informed that his driver wouldn’t be able to take him to the airport.
Yesterday, Woodford turned up at the Serious Fraud Office in London and presented them with all of the evidence that he’d accumulated associated with what he regarded as Olympus’ not-quite-okay dealings. In return, Olympus has said that it plans to take legal action against Woodford. It has also denied and confirmed making an excessive payment to the Cayman Islands company.
Since Friday, when Woodford was dismissed, Olympus’ shares have plummeted by about 40%. That’s swiped $3.2 billion off of its market value. That’s a super high price to pay for a divergent management style, isn’t it?
Woodford has given quite a few interviews since his return to the UK. You can hear his own explanation of things to both Channel 4, embedded below, and to the BBC.
This murky and convoluted story is one that could run for a while yet. It’ll be very interesting to see how it unfolds.