March 19, 2012
Within nine months of becoming the president of Olympus, Michael Woodford had exposed a $1.5 billion fraud, crashed the stock price and forced the entire board’s resignation.
They should have known this man was trouble.
The British executive had caused a stir in 2005 and 2008 when he forced employees to resign over wrongdoing. He also nearly resigned in 2008 when he came across dubious financial activity.
So what were they thinking when they hired him?
“It’s a very good question. Why take someone who had a known record when he saw wrongdoing of dealing with it, why make him president of the corporation?” Woodford said in an interview with Business Insider.
Woodford attributed the decision to desperation.
“The decision to make me president was made by chairman Tsuyoshi Kikukawa alone. What he needed was an executive who could deliver results. I had taken loss-making businesses in the US and headed the medical business in Europe and I understood the medical business, which was key to Olympus’ profitability. They needed urgently to bring on someone who could increase profitability.”
They thought I would improve results and then the wrongdoing would slip away into history,” Woodford said.
Olympus was at the time the most indebted corporation in Japan, with debt to equity of 600 percent. Following the stock crash, the corporation is even more screwed and may have to enter a strategic alliance to survive, says Woodford.