Feb. 27 (Bloomberg) -- Olympus Corp. proposed an 11-member board to replace President Shuichi Takayama and other directors following the Japanese camera maker’s admission of a 13-year cover-up of investment losses.
Hiroyuki Sasa, 56, head of marketing at the medical systems unit that is now Olympus’s biggest earner, was nominated as president, the Tokyo-based company said in a statement today. Shareholders will vote in April on the nominees, who include Yasuyuki Kimoto, a former executive at main creditor Sumitomo Mitsui Financial Group Inc., as chairman.
Overseas investors including Southeastern Asset Management Inc. and Harris Associates LP have criticized the role of current executives in proposing a new board, saying a clean sweep of management is needed to restore confidence. An outside panel in December reported a culture of “yes men” at Olympus that failed to stop senior executives funneling money through offshore vehicles to hide the losses.
“The creditor orientation of the board is unacceptable,” Southeastern, with a reported holding of 5.1 percent of Olympus stock, said today in a statement. “We are extremely disappointed with the composition of the proposed board,” the Memphis, Tennessee-based investor said.
Shareholders are scheduled to vote on the new board April 20. While Southeastern said the proposed board “is not something we can support,” no alternative candidates have emerged as yet.
Former Olympus Chief Executive Officer Michael Woodford dropped his plan to put forward a new slate of candidates and fight for control of the company in a proxy battle. Woodford’s public questioning of past acquisitions after he was fired in October forced Olympus to admit to a $1.7 billion accounting fraud, prompted a criminal probe of the company and led to the dismissal of senior management implicated in the cover-up.
Olympus has plunged 45 percent since the Oct. 14 dismissal of Woodford, its first non-Japanese president. The stock fell 3.3 percent to 1,373 yen in Tokyo trading today before the announcement, trimming its gain this year to 36 percent.
Naming a person linked to the company’s main creditor creates a conflict of interest, Woodford said today.
“We’re back to the bad old days of the banks running the companies,” Woodford said in a phone interview from London. “Having a bank there can be counter to the interest of other shareholders.”
Takayama told reporters today in Tokyo that banks weren’t involved in the cover-up of losses.
Hideaki Fujizuka, a former executive at Mitsubishi UFJ Financial group Inc.’s banking unit, another creditor of Olympus, was nominated as a director.
The proposed board comprises three Olympus officials: Sasa, nominated as president, Shigeo Hayashi, president of the company’s unit in Nagano prefecture and Yasuo Takeuchi, a manager at the corporate center. That compares with eight internal directors at the current 11-member board.
Former bankers Kimoto and Fujizuka were nominated to be internal directors.
“A new management drawn from internal officials and a former banker wouldn’t look likely to ring significant changes at Olympus,” Yoshikazu Higurashi, an analyst at Deutsche Bank AG in Tokyo, said before the announcement.
Olympus is also inviting six outside directors including Asahi Kasei Corp. adviser Shiro Hiruta, 70, former chairman of Kao Corp., Takuya Goto, 71, a former Merrill Lynch banker Hikari Imai, and former president for Louis Vuitton Japan, Kiyotaka Fujii.
President Takayama and all other board members offered today to step down as of April 20, according to the statement.
The camera maker and world’s biggest endoscope manufacturer is facing shareholder lawsuits and may be subject to further criminal investigation after admitting to covering up investment losses from the 1990s. The company restated past securities reports and took a $1.3 billion reduction in net assets in December.
“The new board does not offer the break from the past that investors had hoped for,” said Yo Takatsuki, an analyst for Olympus shareholder F&C Investments. “In appointing the ‘usual suspects’ to its board rather than outsiders who might have provided genuine challenge to the company’s culture, Olympus has missed a valuable opportunity.”
Three former executives at Olympus including ex-chairman Tsuyoshi Kikukawa, and four others were arrested Feb. 16 for suspected violation of Japan’s Financial Instruments and Exchange Act.
Olympus’s Tokyo headquarters and its affiliated offices were raided in December by prosecutors after the company said Kikukawa and two others colluded to hide the investment losses.
Olympus sued 19 current and former executives, including current President Takayama and five corporate auditors, in January over their roles in concealing losses. The company formed panels to reform management and nominate a new board.
Founded in 1919 as a microscope and thermometer business, Olympus produced its first camera in 1936 and a predecessor to the modern-day endoscope in 1950, according to its website. Olympus now controls 75 percent of the global market for endoscopes, instruments doctors use to look inside the body’s cavities to help detect disease.
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