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Taking Stock - back to basics for beleaguered Olympus

The new board at Olympus lays plans to rebuild the scandal-hit company.

It has been a year that will remain fixed in the memory of the Olympus management team. Last year the Japanese camera and medical equipment company admitted hiding losses totalling ¥130bn (£1.1bn), causing its shares to plummet. The firm is being investigated by authorities and several former senior members of management have been arrested, including former chairman Tsuyoshi Kikukawa, ex-executive vice president Hisashi Mori and former auditor Hideo Yamada.The scandal was brought to light by former chief executive Michael Woodward, who raised concerns about accounting irregularities. The 51-year-old from London was dismissed in October after he questioned exorbitant fees for advice on buying British medical equipment maker Gyrus and other expensive acquisitions in 2008.

He filed an employment tribunal action in the UK, claiming unlawful dismissal and discrimination, after the rest of the board met without hearing from him and sacked him. However, both sides have now agreed to settle, with Olympus paying Woodford £10m.

“In today’s settlement [...] we reached a fair and amicable agreement, and I would like to take this opportunity to wish the new board well in taking Olympus forward,” Woodford said in a statement. “It is a wonderful company with wonderful products and people and has a bright future.”

However the company’s financial problems continue to pile up, and it recently announced losses of £400m in the year to the end of March 2012, although, rather optimistically, it forecasts a profit approaching £60m in 2012-13.

To rub salt into the wound, the company intends to shed 2,700 jobs in a five-year recovery plan, and says it will close around 12 of its 30 manufacturing plants by March 2015.

Hiroyuki Sasa, the new president of the company, said that his immediate priority was to “fix the damaged brand and win back trust as soon as possible. In order to achieve a turnaround at the firm we will reform the management structure to ensure that such a scandal will never happen again. By working together with the new management, I plan to do my best to rebuild trust and improve the firm’s value.”

Sasa continued: “The company aims to return to the basic values it had at founding and make a fresh start in order to regain the credibility of its stakeholders, build itself anew, and create new corporate value. Under the new management structure, we have designated three corporate management policies: ‘Back to Basics’, ‘One Olympus’, and ‘Profitable Growth’.

“Expressing regret for our past misconduct, we aim to achieve growth with profitability by adopting ‘Back to Basics’ as the principle behind all our actions and strategies,” Sasa continued. “We will make a concerted effort to share values and goals among all our employees around the world with the aim of building ‘One Olympus’.”

The company says it will redefine its core business domains, with a special focus on the medical business.

These steps, Olympus says, will improve the company’s equity ratio - the proportion of assets financed by equity - from 4.6 per cent now to 30 per cent in five years, above the 20 per cent level widely regarded as indicative of financial stability.

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