Olympus’s Alice-in-Wonderland World: The Ticker

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By William Pesek

Only in Japan. It’s something we expatriates say to relay the Alice-in-Wonderland quality that can color life in Tokyo, particularly where politics and business are concerned.

The Olympus Corp. scandal is Exhibit A. Rarely does a financial tale carry so much intrigue -- clueless executives, hapless regulators, compliant bankers, billions of missing dollars, gangsters, exotic-sounding book-cooking techniques like “tobashi.” The Japanese way of doing business has rarely been under such intense global scrutiny.

And yet the complacency of shareholders takes us tumbling down the rabbit hole anew.

In October, Michael Woodford was ousted as president for raising questions about billions of dollars of dodgy mergers-and-acquisitions payments. His firing wiped additional billions off Olympus’s market capitalization, forcing the resignation of Chairman Tsuyoshi Kikukawa. Yet the vindicated Woodford is having difficulty retaking the helm to right the mess at the 92-year-old Japan Inc. icon. Shareholders just aren’t following him.

Somehow, Olympus executives, led by new President Shuichi Takayama, are clinging to their jobs. No argument can be made that the board shouldn’t be axed, and yet it remains employed. Shareholders should speak out and demand answers -- and change -- at Olympus. Sadly, they’re not. And, frankly, they deserve what they get as Olympus’s share price dwindles.

On Thursday alone, shares plunged as much as 20 percent after Olympus restated earnings and took a $1.3 billion reduction in net assets. Few believe this will be the last restatement as this surreal plot thickens and darkens.

Regulators, meanwhile, are doing Japan no favors by going easy on Olympus. In 2007, Livedoor Co. President Takafumi Horie was jailed for fraud in a hostile takeover battle. Very small beer compared to Olympus, that episode involved Livedoor’s offices being raided and the Internet start-up being delisted. Why has none of this happened at Olympus? No raids, no high-profile arrests, no delisting of shares. Why the double standard?

One reason is that the scrappy, 30-something, T-shirt-wearing Horie was an outspoken critic of Japan Inc.’s insular and clubby ways. Olympus executives are far more a part of Tokyo’s through-the-looking-glass corporate establishment.

By giving the leaders of Olympus a pass, both shareholders and regulators are being negligent. Shareholders deserve the additional losses they are likely to experience in the months ahead. Don’t ask Alice why. Ask yourselves.

(William Pesek is a Bloomberg View columnist.)

-0- Dec/20/2011 16:21 GMT