Decent exposure

After legal proceedings concluded remarkably quickly by Japanese standards, a Tokyo court last month found three former executives of the Olympus Corporation guilty of falsifying financial statements to cover up losses. The three, who included former chairman Tsuyoshi Kikukawa, received suspended prison sentences. The corporation was fined 700 million yen (£4.6m).

It was the latest act in a drama (for once in a corporate setting, the word is appropriate) that began two years ago when Olympus’ British president, Michael Woodford, blew the whistle on unexplained transactions carried out in his company’s name. His insistence that the transactions be properly investigated cost him his job and, because of allegations about the involvement of organised crime, put him in fear of his life. In the end he was vindicated by an external report which found Olympus’s senior management to be ‘rotten to the core’.

Woodford has just published his account of the saga under the title Exposure (Penguin, £9.99). Despite the front-cover blurb, it’s not quite Grisham material. Rather, it is raw and sometimes toe-curlingly personal instant history. And well worth reading for anyone who wonders how they might deal with revelations of misconduct at their own workplace. 

Lawyers don’t come out of the story brilliantly. Lewis Silkin gets a mention for initially taking on Woodford’s case, then after eight days saying it had discovered a conflict. ‘They still sent their invoice, however, and I felt the least they could do was to waive it. It is experiences like this that give lawyers a bad name.’ Japanese firm TMI also decided it was conflicted, Woodford says, though he does not say whether it sent him a bill.

External auditor Ernst & Young ShinNihon LLC meanwhile gets a roasting for okaying astronomical ‘advisory fees’ with which Olympus tried to conceal misbehaviour.

The main blame, however, lay with a deferential corporate culture in which it was not done to ask difficult questions. Sound familiar?

One part of the account doesn’t quite ring true as ­ Woodford gives the impression that he was catapulted instantly from plain sailing to crisis mode by an article in an ‘obscure Japanese magazine’, Facta. Obscure magazines make allegations about big companies all the time. (Indeed organised gangs in Japan have been known to publish their own small-circulation scandal sheets to extort money from businesses, though there is absolutely no suggestion of Facta being in this league.)

Usually when this happens, the knee-jerk corporate response is first to shut down the criticism, preferably with a scary libel suit and investigate later (if at all).

Woodford’s reaction suggests either remarkable prescience, or that the magazine was pushing at an open door. But either way, in taking the allegations seriously from the start, he was doing the right thing. 

I hope his account encourages other senior executives to think about what they would do in the circumstances. 

Michael Cross is Gazette news editor

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