Woodford Sues Olympus Over Dismissal, Giving Up Proxy Battle for Control
Olympus Corp. (7733)’s former Chief Executive Officer Michael Woodford said he’s suing the Japanese camera maker over his dismissal as he abandoned plans to wage a proxy battle for control of the company.
Woodford, 51, filed a case in the U.K. last week seeking damages for the remainder of his four-year contract and additional costs, and may also file a case in Japan, the British national told reporters yesterday in Tokyo. He declined to specify the amount he is seeking.
The announcement came as Woodford abandoned efforts to regain control of Tokyo-based Olympus, which fired him after he questioned $1.5 billion in takeover costs that have become the center of criminal investigations of the company. The former CEO, who was dismissed Oct. 14, cited a lack of support from Japanese shareholders (7733).
“None of the major Japanese institutional shareholders have offered one word of support to me,” Woodford said in a statement earlier yesterday. They “have in effect allowed the tainted and contaminated board (7733) to continue in office.”
“Olympus can avoid turmoil thanks to the withdrawal of Woodford,” said Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. in Tokyo. “The next focus is whether or not Tokyo Stock Exchange will delist Olympus.”
The company’s plans won’t be affected by Woodford withdrawing his bid for control, Tsuyoshi Kitada, a spokesman for Olympus, said by phone yesterday. It may still hold an emergency shareholder meeting as early as March depending on the results of its panel reviewing management at the company, he said.
Olympus can’t confirm whether Woodford has filed a lawsuit, Kitada said.
Olympus’s biggest shareholder, Sumitomo Mitsui Financial Group Inc. (8316), said it would maintain support for the company after Japanese prosecutors raided Olympus’s offices following admissions that it hid investment losses for more than a decade. Southeastern Asset Management Inc., the company’s biggest overseas stockholder, and Harris Associates LP have said the entire board and all executives involved in the fraud must go.
Reform ‘Must Proceed’
“Though Mr. Woodford is no longer a factor, reform must still proceed,” David Herro, chief investment officer at Chicago-based Harris, Olympus’s ninth-largest shareholder, said in an e-mail. “As the third-party committee implied, the entire board is responsible and must all be replaced.”
Josh Shores, senior analyst and principal at Southeastern, expressed regret that Woodford ended his fight for control. Olympus, Shores said in an e-mailed statement, “continues to suffer under shoddy corporate governance and an utterly discredited board.”
Allowing the current board to remain is damaging to the company, Woodford said in his statement.
Olympus has lost (7733) about $5 billion of market value since firing Woodford and restated more than five years of earnings last month to avoid being automatically delisted from the Tokyo Stock Exchange after admitting to a 13-year cover-up.
The company inflated fees to advisers on the 2008 acquisition of Gyrus Group Plc and overpaid in purchasing three Japanese companies with the intention of increasing goodwill, an independent panel investigating the fraud said last month.
The panel set up to investigate the fraud said in its report it found a culture of “yes men” and a board that failed in its duty to stop a “rotten” core of executives from duping auditors, regulators and investors.
Olympus admitted in November that former Chairman Tsuyoshi Kikukawa, Hisashi Mori, who was fired as executive vice president, and Hideo Yamada, a former company auditor, colluded to hide losses from securities investments in the 1990s. Olympus’s main bank and business partners hold stakes in the company, which is common among Japanese companies.
“The fact that such a situation can exist despite the explicit findings of the third-party committee is depressing and totally disorientating to those looking in on Japan from the outside,” Woodford said. “This issue of the weaknesses created by the cross-shareholding system is the most important single factor Japan needs to address to be successful in confronting the obvious challenges it faces.”
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