Reuters on Olympus Japan corruption issue: It takes a NJ whistleblowing CEO to uncover it, yet he gets sacked for “cultural reasons”


IN APPROPRIATE, A novel of culture, kidnapping, and revenge in modern Japan, By ARUDOU Debito

Handbook for Newcomers, Migrants, and Immigrants to Japan\" width=「ジャパニーズ・オンリー 小樽入浴拒否問題と人種差別」(明石書店)JAPANESE ONLY:  The Otaru Hot Springs Case and Racial Discrimination in Japansourstrawberriesavatardebitopodcastthumb
UPDATES ON TWITTER: arudoudebito
DEBITO.ORG PODCASTS on iTunes, subscribe free

Hi Blog. This is still a growing issue, and there’s an excellent Reuters article below to hang this blog post on.

Consider the case of Michael Woodford, a Brit hired more than thirty years ago by Japanese firm Olympus, with the superhuman tenacity to work his way up to the post of CEO (not hired, as are many of the famous NJ executives in Japanese companies, as an international prestige appointment). The presumption is that his appointment was because Mr Woodford would be different — there are plenty of Japanese corporate drones who would have gladly not rocked the boat for a quiet life and comfortable salary. But when he actually does something different, such as uncover and question possible corporate malfeasance, he gets fired because “his style of management was incompatible with traditional Japanese practices“.

This of course, as further investigations finally gather traction, calls into practice the cleanliness of those traditional Japanese corporate practices. And it looks like the only way to get them investigated properly in Japan is to take the issue to overseas regulators (this is, after all, an international company, if only in the sense that it has international holdings, but now beholden to international standards). Not to mention the Japanese media (which, as the article alludes to below, is once again asleep at its watchdog position).  None of this is surprising to the Old Japan Hands, especially those let anywhere close to Japanese corporate boardrooms, who see this nest feathering as a normal, nay, an obvious part of Japanese corporate culture the higher and richer you go.

But woe betide the NJ whistleblower — perpetually in a vulnerable position for being of the wrong race and for not doing what he’s told like a good little gaijin. After all, there’s peer pressure behind membership in “Team Japan”, and as soon as it’s convenient, the race/culture card gets pulled by the crooks to excuse themselves. I’m just glad Mr. Woodford had the guts to do what he did. I doubt it’ll result in a system-wide cleanup (the rot is too systemic and entrenched in corporatist Japan, and few watch the watchers). But you gotta start somewhere, since exposure of corruption must be seen to be becoming commonplace in post-Fukushima Japan. Bravo Mr. Woodford, and expose away. Arudou Debito


Analysis: Japan, slowly, waking up to the mess at Olympus
Reuters, Wed, Oct 26 2011, courtesy of CB and The Club

By Linda Sieg

TOKYO (Reuters) – Japanese media interest has been muted, regulators are mostly mum and many politicians seem unaware anything is amiss.

A scandal over questionable deals at Japan’s Olympus Corp has so far generated little domestic heat in a country where critics say corporate governance is lax, but signs are emerging that the wall of indifference might crack.

Olympus fired its British chief executive Michael Woodford on October 14, charging that he had failed to understand the 92-year-old firm’s management style and Japanese culture.

Woodford — who joined the company in 1980 — says he was sacked for questioning a massive advisory fee paid in a 2008 takeover as well as other deals.

“The implications for investor confidence in corporate governance in Japan are pretty severe,” said Jamie Allen, secretary general of the Hong Kong-based Asian Corporate Governance Association.

“What would be positive is if Olympus fronted up … and the regulators actually took some tough action. I think regulators can turn it around. Whether they will is another matter.”

A niche Japanese business monthly magazine broke the story of possible misdeeds at Olympus, a maker of cameras and medical equipment, but mainstream media have been slow to take it up even after Woodford was fired.

Explanations of the initial laid-back response range from cozy ties between media and corporate Japan, a tendency to await official leaks rather than dig and even fears that yakuza crime syndicates are somehow involved.

Signals that the tide might change, however, have begun to trickle out, following a pattern seen in the past when a domestic magazine unearths dubious deeds, foreign media pick up the tale and mainstream Japanese media finally jump in.

Asahi TV and the Nikkei Business magazine ran interviews with Woodford on Wednesday, and the mass circulation Mainichi newspaper, noting the many puzzling aspects to the case, called on Olympus to clarify the facts while urging regulators to take strict steps.

“This is a situation that is likely to hurt the image of Japanese firms,” the paper said, noting the high level of interest among foreign media. That followed a similar editorial in the Nikkei business daily the day before.


What action authorities take will be key to whether investors’ broader concerns are soothed.

“Companies make mistakes and corruption occurs. It’s the response that matters,” said Pelham Smithers, managing director of Pelham Smithers Associates in London.

“So far the response has been measured … there is nothing wrong with taking time for a conclusion to be reached,” Smithers said. But he added: “If the details of this continue to be covered up so that investors cannot make a rational decision about investing in Japanese companies, then we have a problem.”

The Tokyo Stock Exchange (TSE) said on Monday it was urging Olympus on a daily basis to disclose more information and Financial Services Minister Shozaburo Jimi has said the watchdog would do its duty. In a heads-up to investors, the TSE said on Wednesday it had begun publishing short-selling data.

Woodford has written to Japan’s Securities and Exchange Surveillance Commission (SESC) asking it to look into the matter. The SESC — like Britain’s Serious Fraud Office which the ex-CEO has also approached — has not commented publicly.

But two sources familiar with the matter said on Wednesday the SESC was looking into past Olympus M&A deals, focusing on whether Olympus made proper financial disclosures about them.

Woodford said on Tuesday he was in touch with the U.S. Federal Bureau of Investigation, which is probing the advisory fee, most of which went to an obscure Cayman Islands firm.

Experts said more was doubtless afoot in Japan than met the eye. “I expect that authorities internationally will coordinate,” said Shin Ushijima, a prosecutor-turned-lawyer.

“I don’t mean that something illegal must have been done, but the authorities will be interested in finding out … Authorities including the SESC must definitely be interested. It is impossible that they are not.”


The Olympus scandal could re-ignite debate on what critics say is a deep-seated weakness of Japanese management — a lack of strong independent oversight of boards that risks inefficient use of capital and gives shareholders’ rights short shrift.

“You don’t have to have fraud to have a corporate governance problem. The bigger problem is the lack of transparency on how the board is making decisions,” Allen said.

“The lack of outside independent directors is simply a symptom of the underlying issue that companies are run by a tight group of people who have been in the company for decades.”

That mind-set was also a factor behind a failure by Tokyo Electric Power Co (Tepco) to take steps to prevent disaster at its tsunami-hit Fukushima atomic power plant in March.

A review of company and regulatory records has shown that the utility as well as the government repeatedly played down the danger and ignored warnings.

“The public ought to be screaming out loud that this (Fukushima) is a governance problem. It was a failure of oversight,” said Nicholas Benes, representative director of the Board of Director Training Institute of Japan.

Despite some improvements over the past decade, including a requirement by the TSE from this year that all companies have at least one independent director or auditor, many companies still appear unconvinced of the need for strong outside oversight.

“Companies themselves have been dragged into it. They haven’t bought into it,” said Darrel Whitten, managing director at Investor Networks Inc, an investor relations consultancy.

“The playing field has shifted … but corporations haven’t been able to keep up with the shifts.

Japanese institutional investors have long been criticized for not pressing management, although here too change is under way as more institutions seek good returns rather than simply buying shares to cement strategic business ties.

Nippon Life, Japan’s largest private insurer and Olympus’s biggest shareholder, last week joined foreign investors in calling for answers from Olympus, prompting the firm to announce it would set up an independent panel to investigate.

But many domestic institutions still tend toward silence on matters of corporate governance.

“Japanese institutional investors are not standing up and asking vocally for changes because in many cases they are conflicted,” Benes said. “They come from a background of cross-shareholding and it’s tied to their DNA not to rock the boat.”


In some ways, corporate governance would appear a tailor-made topic for the ruling Democratic Party of Japan, which had pledged to take steps to foster better governance in its platform ahead of the 2009 election that vaulted it to power.

Senior Democratic lawmaker Tsutomu Okubo sounded the alarm on Tuesday, urging Olympus to provide an explanation and regulators to probe the affair to prevent investors from losing confidence in the company and corporate Japan.

“There’s a possibility that Japanese companies will be perceived as lacking corporate governance, so to prevent that from happening we need to re-examine our systems,” Okubo, the Democratic Party’s deputy policy chief, told Reuters.

But efforts by Prime Minister Yoshihiko Noda, who took office last month, to repair ties with the main business lobby Keidanren, which frayed under his predecessor Naoto Kan, could work against any efforts to put fire into the governance debate.

“The attempt to reconcile with Keidanren puts the DPJ on the wrong footing when they deal with issues like this,” said Sophia University political science professor Koichi Nakano.

“They don’t want to come across as anti-business unless public opinion, led by media, pushes in that direction.”

With politicians distracted by other policy problems including whether to join talks on a U.S.-led free trade initiative, how to combat a strong yen that is hurting exports and the need to tackle social security and tax reforms, they may not have much scope to take on another headache now.

“I don’t see this spreading as an issue for now,” said one political source. “Of course, that could change if Japanese TV broadcasters take up the case.”


49 comments on “Reuters on Olympus Japan corruption issue: It takes a NJ whistleblowing CEO to uncover it, yet he gets sacked for “cultural reasons”

  • Great post Debito, and glad to see it! The Japanese press were so quick to report Mr. Woodford’s firing as a case of ‘a gaijin trouble-maker who didn’t understand the way things are done in Japan’, and yet the same press has been ever-so-slow to pick up on the fact that Mr. Woodford was unfairly dismissed for carry out the responsibilities of his position (asking directors where the missing money went!). Compare this with the media attention paid to ‘talento’ who paid the yakuza a little money. It’s staggering, considering the huge sums of money involved, that the J-media seem happy to pass on this. Perhaps the J-media are wrong-footed? It is easy to blame the NJ for wrong doing, but the Olympus scandal is an embarrassment, and a stain on ‘Japan-Inc’s’ international image, so perhaps the domestic media will just try to mokusatsu this story away.

  • I would be cautious at this point regarding praise for Mr. Woodford.

    Moreover, I question the premise that “The presumption is that his appointment was because Mr Woodford would be different”

    Given his 30 years of service at the firm, I would suspect that he was appointed because he would NOT be different, but that he would APPEAR different to non-Japanese.

    In other words, I believe it likely that he was selected cynically as a way to manipulate investors and others while wanting no change at all.

    In addition, I wonder whether there was more to his actions, such as self-preservation on his part.

    The fact that he contacted the US FBI and the Japanese SESC suggests to me that he believed that he was in substantial risk of a criminal prosecution, as the head of an organisation that may be charged with crimes.

    As such, he may have made the decision that he would rather be free, and likely jobless, than an imprisoned and jobless person.

    Much depends on exactly what he knew regarding this potential criminality, when he learned of it, and what steps he took to ensure his own ongoing wealth prior to his exit from the firm.

    I remain sceptical that he was purely altruistic in his motivations.

    — Who said that he was? And so what if he wasn’t? Did Olympus engage in corrupt practices or didn’t they?

  • Loverilakkuma says:

    @Charuzu #2

    “Given his 30 years of service at the firm, I would suspect that he was appointed because he would NOT be different, but that he would APPEAR different to non-Japanese.”

    I’m confused. Who is “he”?–Woodford or the chairman Kikukawa or someone behind the scene?
    Woodford served as CEO for only several months, didn’t he?

    Personally, I’m shocked to see the name of Olympus in the news headline. They have been considered as a decent Japanese company for providing the good products and high quality of service to the public community for many years. This is gonna be a bad omen if the National Prosecution Office decides to investigate the case in the near future. Too bad Olympus will follow Canon Inc. and Toyota to get their reputation tarnished for bad corporate governance.

  • Loverilakkuma:

    I am sorry if I was unclear.

    The “he” is Woodford.

    The article says that “Woodford — who joined the company in 1980”

    I believe that if one works at an enterprise for 30 years then one develops a deep sense of the organisation, even if one was only CEO for a much shorter period.


    You describe Woodford in complimentary terms such as a “whistleblower” who “had the guts to do what he did.” and “Bravo Mr. Woodford” and one who chose to “question possible corporate malfeasance”.

    I question whether he was acting on the basis of bravery or “guts” or merely on the basis of self-preservation, like a rat fleeing a sinking ship.

    He may not have questioned the malfeasance, but rather simply taken measures to preserve himself in the face of potential prosecution for crimes.

    One does need to have courage to act to expose evil when one’s personal self-interests are in conflict with making such disclosure.

    However, one does not require courage if one is fairly certain that one will be facing criminal prosecution, and disclosing evidence to the government may reduce the likelihood of one’s own prosecution.

    So, my concern is with an assumption that Mr. Woodford made disclosures in a manner that he unmotivated by the likelihood of imminent prosecution for crimes at Olympus.

    Such an assumption is possible.

    However, I believe it to be unlikely, given Woodford’s long years of service at the firm.

    I would make the analogy that if a long-time Japanese civil servant rose up through the ranks for 30 years and finally reaches the senior-most civil servant position, I would not expect him to be surprised that misfeasance occurs at the uppermost echelon of government. Such a civil servant would surely have seen signs of it on his way up the bureaucratic ladder.

    So too with Olympus.

    — And given the lack of protection for whistleblowers in Japanese society, do you think that your prototypical civil servant would have squealed? More likely not. There’s no guarantee these allegations of malfeasance would have surfaced at all if everyone maintained omerta. So therein lies an arguable degree of courage.

    Anyway, we got it: You questioning the motives of the whistleblower. But that’s barking up the wrong tree. Was there corporate malfeasance or not? That’s the point of the Olympus scandal.

  • Charuzu,

    I can understand your skepticism of Mr. Woodward’s motives, but I think if you read some articles from a few other sources, you’ll find that he’s not the one to blame for this mess. You can even find copies of letters he sent to members of the Olympus board and staff before he was fired, in which he voiced his concerns and called for the resignation of board members. He’s also the one who commissioned the PWC report into the fees in question. It’s become quite clear that the Olympus board decided to oust Woodward before they were ousted themselves (though Kikukawa was essentially ousted anyway– he resigned today).


    “Mr Woodford’s darker version is supported by documents he collected in the weeks before his dismissal, many of which he has since made public. They include financial data, auditors’ reports and six detailed letters to Mr Kikukawa and another board member asking for clarification about the acquisitions. In the final letter, dated October 11, he demanded they resign over “a catalogue of calamitous errors and exceptionally poor judgment which has resulted in the destruction of shareholder value of $1.3bn”.”

    Also see:

  • Kimiko Manes, author Culture Shock in Mind, wrote in the Daily Yomiuri: “If one’s subordinates or even supervisor are doing something unlawful, the group dynamic becomes complicated. It is hard for the Japanese to speak up as it may lead to the loss of face of for the whole organization. To break the trust of the group, and cause shame for the supervisor…is hard for the Japanese to do. As a consequence Japanese people can be reluctant to become ‘whistle-blowers’…Even if a whistleblower actions are justifiable, he or she will be persecuted within the organization.”

    so, in other words…these kind of scandals are “par for the course” and it is the way it has always been/will be?

    -It is INSANE to me that Japan wants to be a part of the international community but then this kind of thing happens where a major company like Olympus acts all put out by essentially saying “well, this is how WE do things IN JAPAN and Woodford could not acclimate to OUR way of doing things”…..illegally.

    Now, the thing that is interesting to me is if this will act as a kind of benchmark for what happens when you let NJ come in to “manage”/ruin yer company.

    Thinking positive, perhaps this will inspire others to call out shady operations when they see it, to strive for transparency and morality in regards to business practices here in Japan, to…..

    yeah right.

  • I think the net result will be the continued decline of Japan on the world economic stage as they are seen to be more and more corrupt and unable to put their house in order due to “cultural differences” towards corruption.

    The delicious irony that strikes me now is that I remember when people used to say “No, don`t invest in China, it`s corrupt and they ll rip you off. Japan is more honest and western, etc”.

    This case shows everyone that the opposite is now true.

    Reform or die….

  • Credtpunker:


    “Now, the thing that is interesting to me is if this will act as a kind of benchmark for what happens when you let NJ come in to “manage”/ruin yer company. ”

    I believe that this will increase the desire of investors to have non-Japanese and also non-Japanese values govern multi-national corporations.

    The perception is likely to increase that Japanese are like all other East Asian cultures, with regard to their affinity for corruption.


    I do not agree when you say:

    “This case shows everyone that the opposite is now true.”

    China is not “more honest and western” but the sad reality is that many Westerners will conclude that Japan is only a little better than China.

    Japan still does have greater personal freedoms than China.

    But concerns for the quality of its organisations increases.

    And China does have far greater dynamism than Japan.

    — We’re starting to get a little off track. Please relate comparisons with China back to the topic of this blog post if any replies.

  • Shaun O'Dwyer says:

    Thought this needed saying – there are a few quietly heroic Japanese working behind the scenes here: a whistleblower, *maybe* a Japanese Olympus insider, who alerted Facta magazine to the dodgy acquisitions by Olympus, and the editor and writers at Facta, which seems to be an oasis of Japanese investigative journalism.

  • So just how much shareholder value is disappearing in transactions like this one? Does this help to explain why the Return on Equity in Japan is so low?

  • Whilst I am really pleased with how Michael Woodhead has gone about getting this story out (and it is the sort of story that should be publicised), it is worth adding (as is mentioned in the Reuters article) that it was originally in a Japanese magazine and Woodhead heard about it via the article (and then followed up). In one of the interviews he has given, he made a comment along the lines of saying that the real whistleblower is the person who told the magazine, not Woodhead (I think he may have called them a hero but I may have got this wrong). One interesting question is what would have happened if the Olympus directors had resigned as he requested them to, ie would he still have announced what had happened? A mute point now though.

    The reaction of the Japanese mainstream media has been really poor although not expected. The three things that seem to change this were the share price dropping so much (difficult to say this was down to the foreigner leaving without mentioning the bigger story), Kikukawa telling the Nikkei that the “fees” were “only” Y30bn, not the Y70bn that Woodhead claimed, only for Olympus to say the next day that Y70bn was right (probably not a good idea to annoy the Nikkei by misleading them) and, finally, the FBI getting involved (the average person may not understand the transactions Olympus did but they know that the FBI being involved is not a good thing for a Japanese company).

    I am sure this has a long way to go, especially with Olympus still saying today that Y70bn is “reasonable”. If it were not so serious, it would be laughable.

  • Woodford was well aware of the “kaisha” system with its hierarchical structures. Here is an excerpt from an interview with the British Chamber of Commerce in Japan shortly after Woodford became CEO of Olympus.

    BCCJ: You said previously that, had you been Japanese, you wouldn’t have been CEO; that seems to contradict what you said about being the outsider.

    Woodford: Being the outsider does not mean being outside Olympus but, in my case, being a Westerner.


    In Japan, I would have upset too many people and have been put in a chair by the window. Japan needs to get to the point quickly where it can release the talent of younger people.

    I don’t have a romantic idea about gaijin bosses. If it was the other way around, I would be the one at the coffee machine saying, “Look at the Japanese individual running this prestigious British company. He doesn’t even speak English, so what can he teach us?

    Full interview here >>

    I wonder if he accepted the CEO position to shake things up a little. After the TEPCO-scandals, the Olympus story making headlines all around the world, and considering Japan’s economic decline since two decades I expect more and more companies shying away from investing in Japan in the future. It’s like a pivot-point where Akamatsu Kaname’s flying geese model turns upside-down and another East-Asian country is going to lead the rest of Asia into the next part of the future.

  • another jon says:


    I knew someone would misinterpret what I said as meaning China was “honest and western”. No, it isnt. Though Japan and China are arguably converging in several ways which I will not go into here.

    What I meant by “the opposite is true” is that Japan is neither honest nor western, though its PR campaign has always portrayed it as such- when it suits it to be, eg. G7 membership.

    If you want to invest in China, try Hong Kong. Then you really do get transparency and honesty. Its amaxing how often people demonstrate in Hong Kong, and agressively so. Considering their precarious position with maninland China, its all the more courageous.

    Public protests and civil movements in Hong Kong make Japan look like a wimpy, under the thumb post-national/socialist state.. oh, yeah, it is.

    — Now we ARE off track. No more posts on this topic unrelated to this blog post will be approved.

  • It’s interesting to see the comments critical Mr. Woodfords whistle-blowing. This is a symptom of everything that’s wrong with Japanese society; from child abductions to racism- if anyone points out that there is a problem, they become the problem. I guess it’s easier for Japan Inc to attack the one who says something is wrong, than it is to fix the problem. Of course, fixing the problem also means admitting that Japan isn’t perfect, and Japan Inc doesn’t want to do that. What is frightening is that so many NJ have bought into Japan Inc, and allowed themselves to be brain-washed into repeating the drivel (the ‘It’s a cultural difference’ schtick).

  • There was an interesting article in the Japan Times that came out just before the Woodford situation – about a Japanese “whistleblower” from Olympus, amazingly enough. It’s quite chillng (and telling) to see how this individual was treated, especially since he didn’t actually do anything other than pass on a message from an Olympus supplier to please stop poaching our best employees.


    Japan is behind some Western nations in protecting whistle-blowers. Corporate loyalty is king and outspoken employees are often subjected to bizarre punishments, such as assigning them closet-size offices.

    A law to protect whistle-blowers was enacted only in 2006 and critics say it is inadequate because it doesn’t penalize companies that lash out at their accusers. To pursue legal action, whistle-blowers must also stay with the company as the law only applies to employees.

  • — Financial Times on how J media is allegedly conspiring to downplay Olympus scandal, courtesy LK. So much for media watchdogs.

    Japan’s timid media in spotlight (excerpt)
    Financial Times, October 28, 2011

    This summer Michael Woodford, the now ex-chief executive of Olympus, asked fellow board members about a curious story in a small Japanese magazine. The subscription-only monthly Facta – with 30,000 readers and a handful of staff – had accused his predecessor of squandering billions of yen in three opaque acquisitions in Japan.

    What happened next is well known. Olympus fired Mr Woodford on October 14 over what it said was problems with his management style. The Briton responded by going public with doubts about the deals – in which Olympus admits it lost most of its money – as well as an unusually large advisory fee that the company paid in a separate UK acquisition, though it says this was money well spent. The share price fell by half, the US Federal Bureau of Investigation began an inquiry and, on Wednesday, Olympus’ chairman resigned.

    The affair has shone a spotlight on Japan’s media, where big newspapers – unlike the dogged muckrakers at Facta – stand accused of downplaying the story.

    “The mainstream press has been cautious,” says Yasunori Sone, a media studies professor at Keio University. “At the initial stage, Japanese newspapers tend to write from the management point of view.”

    Critics say that not only did the dozens of reporters that cover Olympus fail to follow Facta’s scoop, their coverage of Mr Woodford’s accusations has been circumspect, and mostly buried in the back of their papers. The Nikkei, Japan’s pre-eminent business daily, published them on its front page only on Thursday, nearly two weeks after they emerged, in a story on the chairman’s resignation.

    Shigeo Abe, editor of Facta and a 25-year Nikkei veteran, speculates that Japan’s broadsheets are afraid of everything from losing advertisers to wrecking relations with corporate bosses. The business press, in particular, depends on a flow of smaller scoops – reporting a deal the day before the official announcement, say – that might dry up if journalists exposed uglier secrets.

    Rest at:

  • John (Yokohama) says:

    Still no apology or backtracking on the bogus reasons for turfing Woodford.

    Here is the latest from Bloomberg:

    “Olympus Shares Extend Slump as Investor Demands Wider Purge of Management”

    “Olympus’ revelations echo the practice of hiding losses known as “tobashi” that became widespread in Japan in the late 1980s and led to the failure of Yamaichi Securities Co., according to Yasuhiko Hattori, a professor at Ritsumeikan University in Kyoto. Yamaichi used overseas paper companies to hide problematic securities until it failed in 1997 with 260 billion yen ($3.3 billion) in hidden impairments.”

  • Edited version of what I wrote previously:

    This all ties in with the “Culture of Tatemae” and “Pragmatic Zones of Deceit” varying from culture to culture.

    Olympus is old-guard, and at the extreme end of the cultural bell curve that represents hidden corruption, or at least the convenient (for them) idea that certain things are not spoken about if its to do with management building nest eggs for themselves at the expense of investors. Outsiders like Woodford are, to quote one ex major ad agency token gaijin from the bubble era, “brought in to warm seats, not shake things up” (Powers, 1990).

    The mainstream media is also old-guard, what was mainstream but what now is arguably being forced to the same extreme end as Olympus as Japanese people start to demand their own glasnost in the wake of this and Fukushima (I hope). As new patterns of behavior emerge (more honne or openness), these will hopefully expand as part of what it means to be Japanese at the expense of the more Soviet style secrecy.

    Woodford is a gaijin so he is at the other end of the bell curve; he does things directly. Facta-a small magazine not in the pockets of corporate advertisers and therefore with less to lose, is part of the same end of the bell curve- here is an interesting interview with the editor and why he quit Nikkei:

    As soon as I googled Facta, “Livedoor” was also namechecked in a German article. I dont read German, but the article with the link I just provided describes the editor as “a softly-spoken man who wore a jacket with no tie”

    I started to remember how Livedoor`s president was brought down: “Horie was criticized by conservative business circles in Japan for his unconventional manner — everything from his informal attire to the practice of corporate expansion through hostile takeover.[3] In a country where neckties are the norm for businessmen, he was frequently seen wearing t-shirts or unbuttoned collared shirts.”

    “he was not acting like a Japanese”- ie. he is at the other, newer (non conformist) extreme or of the bell-curve of tatemae culture, indirectness, etc.

    A couple of ex employees at a former company used to complain that our old boss was “not acting like a Japanese” as he used to scold them quite directly for not selling anything.

    So, “not acting like a Japanese” is basically used as a corporate weapon against anyone who does not play The Tatemae Money Game. Just shut up and take the money.

  • That Olympus indulged in tobashi isn’t surprising…it’s that they were indulging in tobashi a good TEN YEARS after the practice pretty much dried up; companies realized that it was cheaper to just take the hit.

    You see, at it’s simplest form, tobashi is done in a form of repo aggreement: I have an asset I bought for Y100. It’s now worth Y20. I have to close my financial books, so I call up my account manager at, say, Nomura. We agree to an arrangement: I sell him my asset (that’s only worth Y20) for Y100, and book it as a sale. So, no loss that has to be shown on the books. After the financial period is over, I buy the asset back, for Y102. Hiding the Y80 loss would be tough, but the Y2 cost can be buried in any sort of expense account. This is grossly over-simplifying the situation, but you get the idea.

    Some points here:
    – after companies started being required to report results and financial statements quarterly (early 2000s) doing this little dance gets *expensive*.

    – Tobashi was a -very- profitable business for securities companies in the 90s – I’m sure many of you will remember Yamaichi and Credit Suisse, for example. The major players involved (Sagawa, Nakagawa) were both ex-Nomura. Nakagawa was Sagawa’s boss, and was the account manager for….Olympus; in fact he covered Olympus for decades at a variety of wall street firms. No way Nomura lets Nakagawa leave Nomura and take the Olympus account with him – like I said, tobashi was quite profitable. Would not surprise me at all if Nomura wasn’t more involved than we’re hearing.

    – If the tobashi example noted above sounds familiar…it should; it’s essentially the *exact* same scheme used by Lehman’s in their Repo 105 accounting gimmick.

    – Two major red flags should have been apparent from day one. First, no way Olympus would go to a small, unheard-of financial advisory firm for a multi-billion dollar M&A deal. No, they’d go to Nomura, Goldman, JPMorgan, Morgan Stanley, etc. The advisory fee paid (almost $700mn) was triple the size of the fee paid for the ArcelorMittal merger…a deal that was worth 15 times the Olympus/Gyrus deal. Secondly, if you were a small firm and had just inked a multi-billion dollar M&A deal for a multinational blue-chip company, would you close your company down? No way! You’d leverage it to the hilt to get more deals.

    – one person died in mysterious circumstances in the Horie case. Woodford is very right to be afraid. Pulling this off for 20 years requires far, far more than just the 3 people named so far. Particularly when we know that at least two auditors raised red flags about the acquisitions. At the very least, every president, CEO, CFO and internal auditor knew about this – which makes it pretty much certain that every board member knew about it. And after the Facta article and subsequent reporting by Woodford, that the board could -still- fire Woodford for ‘not understanding our management style’ is a disgrace.

    What the really meant was ‘he didn’t understand how to just turn a blind eye like everyone before him’.

  • How nice:

    Ex-Olympus president Shimoyama says hiring foreign CEO regrettable, Gendai Business says
    November 25, 2011, courtesy lots of people

    TOKYO (TR) – Toshiro Shimoyama, a former president of troubled camera and endoscope maker Olympus, laments the hiring of a foreign national to head the company, according to Web magazine Gendai Business.

    Shimoyama served as Olympus’s president from 1984 to 1993. “It was a mistake to bring a foreigner in to be president,” Shimoyama was quoted in an interview published Friday by Gendai Business.

    Olympus is presently embroiled in a scandal in which it attempted to hide substantial investment losses dating back decades through questionable acquisitions.

    The former president earlier this month said he does not remember an attempt to conceal loses during his leadership of the 92-year-old company. “As president it wasn’t the case where all financial reports would come to me, so I have no memory. During that time (former Olympus president) Masatoshi Kishimoto was the treasurer…I wouldn’t have heard financial details,” he said in an interview with the Nikkei.

    The man who brought the scandal to light, former Olympus Chief Executive Michael Woodford, is in Japan meeting with prosecutors, the police, and regulators from the Tokyo Stock Exchange who are investigating the matter.

    The British national said he was fired from the company when he began raising questions about several deals, including the $687 million fee Olympus paid to a little-known adviser in its $2 billion acquisition of U.K. medical equipment company Gyrus Group Plc. in 2008.

    Woodford is expected to directly call for Olympus’s leadership to resign when he meets with them Friday for the first time since he was fired on Oct. 14, the Nikkei reported earlier.

    Source: Gendai Business and Nikkei

  • Meaning: “It was a mistake to bring a foreigner in: non-Japanese tell the truth too much!” 🙂

    “Gaikokujin openly discuss problems we want to hide: resulting in perpetrators being penalized!”

    “Gaikokujin don’t know understand: Nippon-jin don’t want truth, Nippon-jin prefer the Status Quo!”

  • — Good live-blogging of Olympus’s Woodford speaking at the FCCJ, dated Nov 25, 2011, where he talks about the malfeasance, his treatment, and even the future of NJ as possible bosses in corporate Japan. Courtesy MD:

    Olympus Corp.’s ousted Chief Executive Michael Woodford returned to Japan for the first time this week since his questions about dubious company acquisitions sparked a boardroom drama that has shaken the camera and endoscope maker to the core. Three veteran executives have resigned and investigative authorities in Japan, the U.K. and the U.S. have launched probes into the company’s shadowy accounting tactics stemming back to the 1990s.

    Mr. Woodford met with Japanese prosecutors, police and regulators Thursday. In the latest development, the three senior executives at the center of the scandal resigned from the board the evening before Mr. Woodford was to confront them for the first time since they fired him on Oct. 14. Mr. Woodford, who met with the remaining board members Friday morning, was expected to call for the rest to resign.

    Mr. Woodford faces the press head on immediately following the loaded meeting at a news conference in Tokyo scheduled for noon Japan local time.

    The Wall Street Journal’s Daisuke Wakabayashi is live-blogging the event.

    Tweets at:

  • Tatemae “….at once surface and symbol. Those who go beneath the surface do so at their peril.” Oscar Wilde (“The Picture of Dorian Olympus Gray”)

  • @Debito
    Linking back to your comment about the ex-President saying that it was a mistake to give the job to a NJ, I think that this is a perfect example of how tatamae/honne culture fails Japan. The implication in all the accusations against Mr. Woodford is that this wouldn’t be a problem if he hadn’t brought it to people’s attention, and just forgot about it (implied; the way a Japanese person would). And this is the problem with the Fukushima disaster also. Tatamae/honne culture makes avoidance of responsibilities, and blame of others, an endemic problem in Japan. As we see from the ex-presidents ‘I didn’t know anything about it’ comment, plausible deniability is the aim, rather than solving the problem.

  • Hello all…Thought I’d share an essay/letter I wrote on some scandals/experiences I went through in Japan’s courts after reading one of the articles in The Japan Times on the Olympus scandal. The Japan Times published my piece (after making minor edits to it)on 1 Dec. The stories I relate in the piece are long and convoluted, and I attempted to distill them in the 300 words or less The Japan Times requests…If you desire more details, have any questions, or wish to confirm the contents of what I wrote you may e-mail me at:

    Thank you…and thank you very much to Debito Arudou for taking the time and energy to maintain this blog.

    Don MacLaren

    link to essay/letter, “Don’t count on a reformation,” published 1 Dec. ’11 in The Japan Times:

    Full text of published piece:

    The Japan Times

    Thursday, Dec. 1, 2011

    Don’t count on a reformation

    Danyang, China
    I have been following the Olympus scandal with interest as it contains parallels to experiences I had in Japan’s courts over corporate malfeasance. The Nov. 26 article “Woodford: Board must be purged” suggests that Michael C. Woodford, the former CEO of Olympus, is concerned because the Olympus scandal may indicate the extent to which Japanese companies are operating according to their own set of corporate governance rules.

    In my experience, this is the crux of the problem in corporate Japan, but I believe it is only with the consent of Japan’s legal system and press that Japanese companies are allowed to get away with things such as fraud and nonpayment of wages: two things I was victimized by and went to court over in Japan.

    At one company, a school based in Tochigi Prefecture, I led employees in two lawsuits over several months in delinquent wages. The company’s directors fled during the second lawsuit and didn’t pay anything. A newspaper article indicated that the company was closed, but I recently found, after obtaining its business registration, that it is still a legal operating entity, with ¥30 million in equity, and has never been in a state of bankruptcy.

    Later, working at a Tokyo trading company as a writer and translator, I was ordered to participate in a scheme to defraud its clients and the Japanese government. I notified authorities. Then, in labor negotiations and in court, the company assured everyone that the situation was resolved — because the vice-president primarily responsible for the fraud was forced to resign his directorship. I recently discovered that he has once again climbed Japan’s corporate ladder and is now the company’s president.

    When problems in corporate Japan appear to be corrected, I have found that they never really are.

    The opinions expressed in this letter to the editor are the writer’s own and do not necessarily reflect the policies of The Japan Times.

  • BBC’s HARD TALK interviews Michael Woodford: Japan ‘sleepwalking to oblivion’
    Courtesy of CL

    Michael Woodford rose to become chief executive of one of the most iconic Japanese companies – the camera and medical equipment maker, Olympus.

    He then exposed fraud at the heart of its leadership and was sacked after 30 years of service. Three people at the Tokyo-based company subsequently admitted he was right and it emerged they had hidden more than $1bn in investment losses.

    Zeinab Badawi asks Michael Woodford what his case tell us about business culture in Japan?

    See 3-minute video at

    (I think the interviewer tries too hard to trip Woodford up. Fixates on Enron and wants to see a difference.)

  • beat me to it.
    I managed to watch the whole program,m in my hotel room yesterday at 4:30am before my early departure for my flight back home yesterday.

    If anyone can get the whole broadcast, since the clip is only 3min long and restricted to UK viewers, it is well worth it. I think this is a game changer. As you now, publicly, have a top CEO explaining the elephant in the room, finally. He’s written a book on the whole mess and there is also talk of a film based on this. So this isn’t going away.

    I’m not sure how Japan Inc can wash their hands of this one…it is very damming indeed as the facts are now public, rather than behind closed doors to be ignored or proclaim there is no evidence. MW points to every fact that is now known and was ignored, also citing only foreign journalist were interested in the story, not one Japanese, none. Even the usual with the usual “hey yes, lets make a law to stop this again and keep everyone off our backs”..but when the law went to the Parliament, it was rejected…so business as usual!..all fact. Japan can’t hide this time.

    All this in the week when Sony, Panasonic et al, have had their credit rating reduced to junk.

    There is only one way Japan is heading…outside Japan, everyone can see this….will the Japanese final except the inevitable and try and do something about it, finally once and for all??….I’m not holding my breath!

  • Jim Di Griz says:

    @ John K

    I agree with you. What’s interesting throughout the Olympus scandal is the passivity of the ripped off stock holders. They seem almost embarrassed that the crime was discovered, not angry that they are the victims.

  • #33JDG

    Even this aspect of the sentencing, has had little coverage. “They” just want it to go away, to return to the “harmony” and illusion of everything is fine. Let’s Hope the alleged fourth coming film stirs things up again 🙂


    Indeed. I wonder whether there shall be a “shitstorm” (to use the new German vernacular) here in Japan, just as there was during the release of the film The Cove. Doesn’t play into the cute/polite/”honest” stereotype of Japan Inc.

  • Jim Di Griz says:

    @ Loverilakkuma #37

    I was going to post that link! Thank you!

    Yes, the JT’s ‘apologist in chief’ slams Woodford for not understanding Olympus’s bad practice was ‘the norm’ in Japan, and then lauds the Recruit boss for his illegal actions. Woodford was clearly wrong because he is NJ. When a Japanese does it, it’s not a crime!

  • Jim Di Griz says:

    Just watched BBC’s Storyville documentary ‘Samurai and idiots’. Woodfood tells his story. It’s clear that they thought it would be perfectly acceptable to use racism to cover up corporate malpractice and fraud.
    Highly recommended.

  • @Jim

    This whole story is still something I can’t understand.

    Did the Olympus board try to set up Woodford to take the fall for the fraudulent losses? But if so how could they have done that?

    Or did the board hope that Woodford could turn the ship around and get the company back to profits, but without disclosing to him the massive fraud. How could that possibly happen, if he wasn’t allowed to look at the books?

    It is a real mystery.

    And these fraudulent losses were several ceo’s distant losses, so the secret had to have been passed down from one ceo to another, but they couldn’t pass it down to Woodford??

    To be honest, if they had given me the role and been honest about the fraud trouble they were in, I would have tried to find a way out for everyone to benefit. But for some reason they wouldn’t tel him about the fraud. But still appointed him to ceo.

    It’s a crazy stupid situation.

    • Jim Di Griz says:

      Your powerful logic fails in this situation! Of course, just as I or any other NJ reader in Woodfords situation would, having been told the truth, have sought to investigate and rectify the problem as a matter of consciousness work ethic to protect the company, staff, and shareholders that we have a responsibility for, right? Of course!

      In Woodford’s situation, whatever his job title/description was, there was still a group of septuagenarian corporate ‘sempai’ pulling strings and interfering in the company business behind his back. I am under the impression that they thought they could just order people like Woodford to ‘look the other way’ and ‘forget about it’. But whilst this approach may have worked with previous Japanese ‘go along to get along’ yes-men, Woodford’s sense of ethics taught him that a problem should be addressed, and his experience of Japan told him that if you were ‘warned off’ from this kind of financial problem then it was likely linked to the yakuza. In this case, there was no yakuza link, but Olympus behavior was so shady (because their malpractice was SO large) that Woodford was left to draw his own conclusions.
      And when Woodford fled Japan in fear for his life, he blew the Olympus story to the English speaking world.
      They could have explained everything to him straight up at the start, he I suspect he would have acted professionally to resolve the financial situation of the company. But Olympus execs weren’t bothered with fixing the problem because (as it eventually worked out) they knew they’d never face jail time for fraud of be forced out by stockholders because TIJ!
      Everyone’s angry with Woodford for embarrassing them with their malpractice, and having the gall to disrupt their ‘dreamy day’ fantasy by forcing them to think about it and take some responsibility, IMHO.

    • Anonymous2 says:

      Woodford gave an excellent interview here where he explains his interpretation of the company leadership’s actions (see the section “Promoting me to president was the chairman’s way of extending his rule”).

      • from the interview “Unless Olympus takes this opportunity to dramatically improve governance within the company, overseas investors will start to question the wisdom of investing in Japan as a whole, quite apart from Olympus. If that were to happen, the Japanese economy would face terminal decline.'”


  • cynical.nj says:

    >there was still a group of septuagenarian corporate ‘sempai’ pulling strings and interfering in the company business behind his back.

    for the record, are you referring to the so-called ‘komon’? always wondering what those guys are about, seems the current CEO of my company is becoming one (instead of ‘just’ retiring..)

    >because TIJ!
    hopefully, more NJ will get understand this… [yes, I am being cynical]

  • I think he was probably set up. Simple sales-man from England, worked his way up in the company was set up to be a smoke screen of the impending disaster of the fraud coming to light.

    Why do I think that?

    His so-called friend saying “I made a mistake putting a gaijin in charge” -just flat out calling him a gaijin as if that was the main problem. It sounds good to Japanese ears. And they can all ignore the fraud that occured because something more interesting is happening – gaijin failure. Pretty sure it was a set-up.

    • TJJ, can you provide a source for that quote? I’d really like to be able to recite the original words when discussing Wajin racism. Plus, Olympus is advertising heavily on the Seibu trains I ride everday, and I’d really like to do up an image of their logo with their bullshit slogan replaced with that quote. Lately I’ve been using the hashtags #wajinracism and #和人の人種差別 while sharing personal experiences on social media. This fits in well with that theme, I think.


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>