Unlikely Hero

March 20th, 2012

Financial Times
By Jonathan Soble
March 20, 2012

Last spring the Japanese highway authority received an unusual letter from Michael Woodford, a 50-year-old Briton who had recently arrived in Japan to take up a new job
as president of Olympus, the manufacturer of digital cameras, endoscopes and other optical equipment.

Woodford, who is tall, broadly built and has thinning brown hair, has long been an advocate of road safety, a cause to which he was drawn as a teenager, when he
witnessed a motorcycle crash that killed a boy. Olympus colleagues were used to his frequent interventions against street hazards.

“He once sent me a video he took of traffic lights at the Champs-Elysées in Paris, which he said were too hard to see,” recalls Koji Miyata, a retired executive who knows him
well.

Woodford badgered Parisian officials until they installed newer, more visible lights. “He is relentless when he thinks something is wrong,” Miyata says. “For him, there are no
shades of grey.”

Although Woodford got his way with the Japanese highway authorities – they agreed to add stop signs to a rest station parking lot that he believed was dangerous – his transformation of the nation’s roadways stalled in October, when Olympus fired him after just six and a half months as president. He had been the first non-Japanese to fill the role since the company was founded in 1919. Its board, which approved the sacking unanimously, suggested that promoting a
foreigner had been a mistake.

Woodford had embarrassed senior executives by issuing instructions directly to lowerranking employees, violating Olympus’s cherished chain of command. Tsuyoshi Kikukawa, the chairman, called him “high-handed”, and speculated later that he “disliked Japan”. As many people now know, Woodford told a different story – one that would turn him into perhaps the highest-ranking corporate whistleblower in history.

In his first interview after he left the company, with the Financial Times, he claimed that millions of dollars of Olympus’s money had “disappeared” in a series of acquisitions before he became president. The apparent fraud had come to his attention several months after he took over, he said, when a Japanese magazine published a story questioning the deals.

Woodford had been working for Olympus in Europe when the deals were approved, by a board led by Kikukawa. What really got him fired, he believed, were his attempts to solicit more information
from the chairman and other fellow executives. “They told me to catch a bus to the airport,” he recounted to the FT during that first interview, in the back corner of a Tokyo café about two hours after his dismissal.

The end had been a shock but not a surprise, and he had prepared for it meticulously: there was a thick, neatly organised binder full of internal documents to back up his
story. His main worry now was that criminal gangs might somehow be involved, and he was eager to get home to his wife and two children in the UK. “I felt very uncomfortable, because the amount of monies paid to parties completely unknown was so huge,” he said afterwards. The sums involved in the Olympus scandal would ultimately expand to about ¥130bn ($1.6bn). After initially denying wrongdoing, the company admitted that
it had been stashing loss-making securities investments in the Cayman Islands and other financial hidey-holes since the early 1990s.

The acquisitions, for which Olympus overpaid intentionally, had been part of a complex scheme to square its accounts. Law enforcement agencies and regulators launched investigations, and last month seven
people were arrested in connection with the fraud, including Kikukawa, two other disgraced Olympus executives and several outside financial advisers suspected of helping executives hide lossmaking
investments.

Olympus’s share price, which fell by more than 80 percent in the weeks immediately after Woodford’s sacking, remains at about half its pre-scandal level, and Japanese
politicians – worried that other companies’ reputations could be tarnished – are reviewing the country’s rules on corporate governance and auditing.

“If they did not know what he was like, then they really were stupid,” says Albert Reddihough, one of Woodford’s first bosses, of the decision by Olympus to bring the
Englishman to Japan. Reddihough is the founder of KeyMed, a UK medical devices company that began as a distributor of Olympus endoscopes and was later acquired by the Japanese group. He has known Woodford since he
hired him as a junior salesman, at the age of 21. The job saved Woodford from an unpromising start: he had left school in Liverpool at 16 for a trainee job at a local factory
that made car and aircraft parts. The plant closed two years later. When he applied to join KeyMed, he was selling tonic water for Schweppes.

Reddihough recalls him as quick to learn and sure of his opinions. “He would not agree with you just because of who you were. You had to work hard to convince him,” Reddihough says. Woodford became a top salesman, and
when Reddihough retired a decade later, he recommended Woodford as his successor, at the age of just 30.

“At first Olympus said no, that he was too young,” Reddihough recalls. Undaunted, Woodford travelled to Tokyo to present a business plan that he hoped would change executives “At first Olympus said no, that he was too young,” Reddihough recalls. Undaunted, Woodford travelled to Tokyo to present a business plan that he hoped would change executives’ minds.

It worked: Olympus allowed him to take over, and eventually he went on to run the company’s entire European business, where he made the region the biggest contributor
to group profits.

In Japan, few foreigners have run a large company, and those who have – Carlos Ghosn at Nissan, the carmaker, for instance, or Sir Howard Stringer at Sony, the electronics
group, – have mostly been brought in to do unpopular things, such as restructure underperforming businesses or break relations with longtime suppliers.

Woodford believes he was brought to Japan to impose the sort of rigorous streamlining that had boosted earnings in Europe on Olympus as a whole. The company had been
losing money, particularly in the highly competitive digital camera market. Kikukawa and other senior board members may have believed they could keep Woodford focused
on day-to-day operations and away from the books. Woodford does not speak Japanese, and his foreignness may have made him seem pliable. “I started to feel like a puppet,” Woodford says of his growing realisation that he
was not part of the inner circle. When he asked questions about the accounts, Kikukawa told him it was a “domestic matter”, and other executives stalled or ignored him. “They
were slapping me. They wanted me to know my place.”

In the eyes of the world, Woodford has come out of the Olympus affair the winner. But he sees his victory as at best only half accomplished.

In January, he announced that he would give up a campaign to win reinstatement at the head of an all-new board, after failing to win support from Olympus’s Japanese
institutional shareholders and bankers.

Instead, he is suing the company and preparing to write a book. He says he sometimes feels as though he was taking on Japan’s whole business establishment, rather than
rotten executives at a single camera maker.

“I am not superman. I cannot change opinion in Japan in such a profound way,” he says. “That has to come from within.”

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