The Atlantic Wire
Jake Adelstein and Nathalie-Kyoko Stucky
Apr 20, 2012
TOKYO — Today’s extraordinary shareholding meeting for Olympus, which is under investigation for $1.7 billion of fraudulent accounting, lasting just under three hours, was punctuated with angry shouting, protests, a motion to fire the chairman of the meeting, and one surprise.
Michael Woodford, the former CEO of Olympus who blew the whistle on falsified accounting at the Japan’s optical equipment maker, stated he might seek to invalidate the shareholder meeting in courts, after Olympus management refused to answer a question about his dismissal. At one point Shuichi Takayama, the former CEO — who chaired the meeting, even attempted to cut off Woodford’s questions, saying that because they were in English, they took longer to answer. The current board members were asked at the shareholders meeting if they still asserted that Woodford was fired for gross misconduct but declined to answer, saying legal considerations would not let them do so.
Woodford, asserted that the company’s refusal to answer contravened Japanese Company Law clause 314 (会社法３１４条), which states the duties of directors to answer reasonable and financially significant questions at a shareholder meeting. When pointing out how Japanese law does require corporate accountability, he referenced Mori Hamada & Matsumoto, the law firm that represents Olympus. He hammered in his point by noting, “Hundreds of billions of yen of shareholder value have already been lost through this scandal. It is obvious that the merits of providing key information on how the new board candidates view the past scandal. Please answer the question in clear, unambiguous language.”
He did not get that answer.
A violation of the 314 clause, if recognized by the courts, could invalidate the decisions made today. It could make some or all of today’s proceeding completely moot. Since 2000, there have been two court cases where failure to answer questions resulted in the Japanese courts nullifying resolutions passed at a shareholder meeting.