Olympus - Caught in the Act - Synthesis

SYNTHESIS

• 1974 - 2009 - KPMG was the company's appointed auditors.

• 1985 - signing of Plaza Accord, Yen appreciated sharply. Export prices

increased, creating bubble economy.

• 1987 - Olympus applied Zaitech, an investment strategy where they invested

spare cash to compensate for dwindling earnings

• 1990s - Bubble economy burst, investments turned sour. His unrealized

losses of billions of yen

• 1993 - Olympus followed the "Tobashi" schemes, the word meaning to fly

away with losses. Known to Kikukawa, Yamada and Mori.

• 1999 - Olympus continued to hid a huge evaluation loss of ¥95 billion under

the mark-to-market basis rule.

• 2004, - Whistleblower protection law passed inJapaj

• 2005, November - Help Line and whistleblower system had been

implemented.

• 2008 - To continue the scheme, Olympus bought Gyrus Group and three

other small venture firms that were unprofitable and unrelated to the

competencies of the company. The acquisition amounted to USD 1.5B.

• 2009, July - E&Y replaced KPMG due to the latter being unable to establish

company relationships with Axam Investments.

• 2011 - Woodford was hired as CEO. He later knew about the overpriced

acquisitions on the above mentioned firms.

• 2011 September - October - He asked the board about it and provided

necessary documents to PricewaterhouseCoopers to investigate the

acquisition of the shares.

• 2011, October 11 - PwC confirmed that there is a possibility of fraud. He sent

letters to Ernest & Young and Kikukawa and Mori for the latter to resign.

• 2011, October 14 - A special board of directors meeting was held to question

the issue. Instead, the tables were overturned and the topic changed to

Woodford's resignation. After he left, he blew the whistle to UK'S Serious

Fraud Office and later on triggered Tokyo Stock Exchange.

• 2011, November 1 - a panel was set up to examine the allegations. Also, the

shares' prices tumbled by as much as 80%

• 2011, November 8 - Olympus admitted to the wrong.

• 2011, November 24 - Kikukawa, Yamada and Mori resigned. Shuichi

Takayama replaced Kikukawa.

• 2011, November 30 - Woodford resigned from Olympus board and held a

proxy fight to restructure the management. But, he lost.

• 2012, February - Olympus sued 19 former and current executives. TSE fined

the company ¥10M.

• 2012, April - appointed new management team

• 2012, May - The company implemented new compliance measures.

POINT OF VIEW

Michael Woodford

STATEMENT OF THE PROBLEM

• What is the effect of corporate cultural difference in the management of the company? Is it really a barrier for Woodford in effectively managing the company? (connected ne here yung nagkaron ng yes culture, employees were afraid to blow the whistle,
• Why did they decide to continue their fraudulent accounting practices?
• In what ways does the Japanese culture hinder fraud detection and deterrence? (connected na dito yung Decision making within Japanese Organization structures is centralized with very dominant managers, saka Deliberately giving insufficient company documents to the auditing firms na galling sa problems ni Kat)

OBJECTIVES

• To analyze the issues regarding corporate culture difference
• To analyze and examine their fraudulent accounting practices and understand their reason for doing it.
• To further learn how to possibly improve their corporate governance.
• To identify the internal problems of the management and the board of directors that led them to this huge fraud and scandal

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