Olympus Corp. President Shuichi Takayama failed to show at his press conference Wednesday how his company would strengthen corporate governance in the wake of its long-running cover-up of investment losses, or how it would prevent the recurrence of a similar scandal.
Takayama's comments at the press conference suggested that the major optical equipment maker would leave these issues to a management reform committee of outside experts it will create.
Takayama said the company's current board members would resign after it paves the way for management reform.
"The basic philosophy is that we'll thoroughly review the company's current [management] system. Everyone, including myself, will be subject to it," he said. "I don't intend to cling to my position."
At the same time, however, Takayama indicated the current board members would play a leading role in deciding who will be their successors.
Wednesday's press conference followed a report released the previous day by a third-party investigation panel, which found that three former presidents--including former Chairman Tsuyoshi Kikukawa--were involved in the cover-up of losses.
"Any executive who was involved in the illicit accounting measures should be replaced," the panel insisted.
At the press conference, Takayama announced a plan to look into the responsibilities of executives and auditors by setting up two more committees of outside members. Olympus also will file a lawsuit against Kikukawa and other former board members, he added.
The president also said Makoto Nakatsuka had resigned as director in charge of financial affairs. His resignation can be regarded as part of the company's efforts to clarify who was responsible for the cover-up and thereby regain market confidence in the company that has deteriorated since the scandal came to light.
However, Wednesday's press conference only dimmed the prospects for management reform at Olympus.
The president said he "deeply regretted" the cover-up and expressed his determination to "revamp [management] to be something worthy of praise."
When it came to strengthening corporate governance, on the other hand, Takayama only showed a passive attitude, suggesting he would wait for the reform management committee to give instructions or suggestions to management.
The cover-up was led by Kikukawa and a few other top executives. However, the board of directors approved corporate acquisitions without spending much time discussing them, despite the huge sums of money involved. Nor did the board of auditors fully examine them.
The third-party panel slammed Olympus' board of directors and auditors, saying, "They comprised only 'yes men' and didn't function at all." Such a company surely will have a rough road ahead to restore market confidence.
Moreover, it is still unclear what role the management reform committee will play, how much authority it will have and who will be appointed as members. The current management will make proposals for the committee's approval regarding a new management lineup and how to reform the company. The reform plan will be submitted to the next shareholders meeting.
Regarding the new management lineup, Takayama said the company might increase the number of outside directors or invite executives from other companies to take its top posts. However, he also suggested the current management would play a leading role in deciding this.
"The reform management committee will examine proposals we make [on the new management]," Takayama said.
Michael Woodford, who had challenged other board members over Olympus' questionable transactions before being dismissed as president in mid-October, argued that those who made wrong management decisions should not be involved in deciding the future of the company.
The former president has been preparing to launch a proxy battle at the next shareholders meeting by formulating a list of candidate executives for the new board, including himself.
Should the current board members fail to meet expectations regarding reform, it would strengthen support for Woodford's efforts and the executives will drive themselves into a corner.
(Dec. 9, 2011)