Olympus update – lawsuit against former chairman & former CEO gives up trying to get his job back
Olympus has sued its former chairman and two other individuals. According to the Wall Street Journal article, Olympus Sues Former Chairman (all articles behind a pay wall), when the company made announcement, they didn’t give details of the suit or even say exactly how people are being sued.
Most interesting tidbit in the article is the lawsuit was based upon an independent report from three lawyers regarding the role of the board in the scandal. That report will be released on January 10, according to the article.
Hint that there’s major, useful news on the horizon:
Olympus on Sunday said it was considering filing suit against its current and former directors, a day after receiving a report from an independent panel of three lawyers appointed last month to investigate the board’s responsibility in the scandal.
Last week, Michael Woodford, the former CEO, gave up on his efforts to get his old job back. He was also trying to get support for a new slate of directors.
He mentioned the stress this whole situation is caused his family, which I would imagine would be quite severe.
Underlying reason from dropping his efforts is the complete lack of support from any of the institutional investors. Mr. Woodford is quoted in the article, Olympus Dodges Fight With Ex-CEO, as saying:
“The failure of even a single Japanese institutional investor to voice active concern about gross malfeasance at Olympus was utterly dispiriting,” Mr. Woodford said in a written statement late Thursday night here.
(BTW, if you are still reading this post, you probably should get an on-line subscription to the WSJ.)
There is heavy cross investing in the Japanese economy. Banks in particular are not only lenders to their customers but equity investors as well.
For background and application in the Olympus situation, see the WSJ article, Ex-Olympus CEO Failed to Get Investor Backing, which says:
The system of companies—particularly banks—holding shares in their business partners or customers became common in Japan after World War II, when financial markets were too underdeveloped to provide needed capital, said Shinji Hatta, a professor of accounting and corporate governance at Tokyo’s Aoyama Gakuin University. In order to secure funds, companies needed to form close ties with their banks, and they cemented those ties with stock, he said.
That meant that though the banks are major shareholders, they are also creditors, and so don’t necessarily share other shareholders’ interests, Mr. Hatta said
Without support from institutional investors, a proxy battle would have little hope of success. Thus, Mr. Woodford gave up his efforts.