Olympus to sue executives after accounting scandal

JAPAN’S disgraced Olympus Corp is suing its president and 18 other executives for up to $47 million (€37m) in compensation, as it struggles to recover from an embarrassing accounting scandals.

The maker of cameras and medical equipment said all board members subject to the lawsuit would quit in March or April, leaving it in the extraordinary position of continuing with its most senior executive, Shuichi Takayama, and five directors it is suing for mismanagement.

One analyst likened the current board to condemned men, resigned to their fate, and said they would have difficulty over the next few months making any strategic decisions, leaving Olympus more vulnerable to an eventual takeover.

“Essentially, everyone feels they are on death row,” said Nicholas Smith, head of Japanese equity strategy at CLSA in Tokyo. “It does seem extremely strange to have the death row cell inside the company. Having nobody at the helm makes it easier for a takeover.”

Olympus shares surged as much as 28% on the news, with investors betting the company’s clean-up efforts would help it avoid a delisting from the Tokyo Stock Exchange, in turn helping to ensure it stayed on bidders’ radars. The stock ended up 20%.

Investors looked forward to the eventual renewal of the board and to Olympus drawing a line under a $1.7 billion accounting fraud which has thrown a spotlight on Japan’s reputation for weak corporate governance.

Olympus has lost almost half its market value since the scandal erupted in October, when it fired British boss Michael Woodford for questioning dodgy acquisition deals at the heart of the scandal.

Six of Olympus’ 11 directors are being sued: five of its eight internal directors and one of three external directors.

Woodford said last week he was abandoning a bid to be reinstated to his old job, lashing out at big Japanese shareholders for their failure to back his bid.

— Reuters