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オリンパス元社長ウッドフォード氏、委任状争い「撤退する」

Transcript of interview with Michael Woodford, former CEO of Olympus

  Michael Woodford, the former president and CEO of Olympus, was interviewed by reporters from the Asahi Shimbun Thursday night in regard to his efforts to form an alternative slate of directors for an extraordinary general meeting of shareholders. “I’ve come to a conclusion,” he said, “that it would not be productive. So I won’t be proceeding, and I will withdraw.” What follows is an edited transcript of an interview held on January 5.

  QUESTION:  Have you really decided to withdraw from any further action to form an alternative slate of directors for Olympus?

  MR. WOODFORD:  There are two factors. One, the emotional well-being of my wife. She finds the uncertainty, continuous uncertainty, very difficult to cope with. She understands that it’s so important to me, this issue, and has been supportive more than I can expect, I think, from any partner.

  But she’s an intelligent woman, and she can also see there is a principal problem in that the Japanese institutional shareholders have not said one word of support. The situation in December, I felt, would lead to a positive situation and clarity with the Japanese shareholders, but they have said nothing. They have not acted.

  Now, remember that Olympus’s stock price fell, at one point, to 80 percent down. These are large shareholders. They have fiduciary duties, they have responsibilities to their own shareholders, and they have, in Olympus, a Board of Directors remaining which received six letters pointing out in the most explicit terms concerns over the $700 million paid in so-called “fees,” which was inexplicable and paid through the Cayman Islands to unknown parties, and over the payment of $800 million for three companies with no turnover, with no logic to it at all. The directors also received the PwC report, yet they chose to do nothing. Quite the reverse; they were hostile, aggressive, and uniformly agreed with my dismissal.

  That, to me, was something very shocking. And, even worse, they continued to support Kikukawa and Mori when they were telling lies and obfuscating. And then Takayama stands up and says at a press conference, “Mr. Kikukawa’s gone, for the good of the company,” but continued to defend the payments and actually said they were good value.

  This really - there’s a writer, Lewis Carroll who wrote a book called Alice in Wonderland. And this is - for anyone looking in, this looks like Alice in Wonderland. How can the institutional shareholders tolerate men who’ve done this running the company? That simply looks extraordinary! Why would the institutional shareholders allow these men to stand?

  They said they would wait for the independent panel. The panel comes out - this is the panel Olympus itself appointed - but chaired by a very esteemed member of the Japanese society, Mr. Kainaka, a retired Supreme Court justice. His findings were categoric that all the remaining Board members were “yes-men.” They had allowed these things to happen, they were contaminated, they were tainted, and they should go.

  Now - when I was here last time it was the most depressing aspect. Takayama - they formed yet another committee. I mean, nowhere else in the world can you go around forming these so-called “independent committees.” Again, it’s  Alice in Wonderland .  Olympus chose these people. I understand they had difficulties finding the candidates, and the chairman, as reported by Reuters, has close links with Sumitomo Mitsui Bank.

  So, that is the reality I face. I don’t want to give in. I don’t want to abandon Olympus. But, I can’t change the institutional shareholders. This cross shareholding, there’s a big business relationship between them that’s an obvious area of conflict. But, this inability to criticize, it is something which is beyond my logic. It’s so irrational, it’s so harmful.

  When I was talking to people when I was away from Japan over the holiday period, everyone asked me, “How can these people still be in office?” And I have to explain they’re there because they’re supported by the institutional shareholders.

  So, the shareholders of those companies should be asking questions, “Why do you support them?” But, if they’re not prepared, if they’re simply not prepared, to support the man who did the right thing, and support these “yes-men,” then I can’t change Japan, in that sense; that has to come from the Japanese people. That has to come from government.

  And the cross shareholding is something I have to face as a reality. If I had come back to Olympus, Sumitomo Mitsui is the biggest creditor. It’s the syndicating bank. They are so - obviously don’t want me.

  I wrote to Mr. Kunibe, the President of the bank, and he said, through a phone message received by my lawyers, through the branch manager, the Shinjuku West Branch manager, that they don’t want to meet with me because they don’t want to interfere, because Olympus has set up a management reformation committee to revitalize the company.

  There are a lot of intelligent people in Japan. There are a lot of wise, knowledgeable, people who are deeply affronted and offended by this. I’m one person who loves this country, but I can only change what is within my ability to change, and the cross shareholding rules exist, these unwritten rules, conventions. Without changing that, this issue will go much further. I mean, there are poorly managed companies in Japan - the boards stay there. There’s never any “creative destruction.”

  Takeovers are not a bad thing if you’ve got a board of directors managing the company badly. And I don’t mean overseas takeovers; domestic takeovers! But, the status quo obsession is just very, very depressing.

  But, that’s the reason.

  If the shareholders had acted, one of them - one of them. But, not one. Not one word of criticism of the directors by any institutional shareholder. That is a very shocking state of affairs, when you’ve had a massive financial fraud, you’ve had the independent panel rule, yet they choose to do nothing. And shame on them, frankly!

  QUESTION:  Do the words, “institutional shareholders” mean the Nippon Life Insurance Company, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corporation?

  MR. WOODFORD:  Yes.

  QUESTION:  I understand that these institutional shareholders have not expressed any opposition to your ideas publicly.

  MR. WOODFORD:  Well, they’ve made no criticism - they’ve made no criticism of the existing directors, and overseas shareholders and other contacts here have tried to reach out. I wrote, last time, to the president of Sumitomo Mitsui -

  QUESTION:  Mr. Kunibe.

  MR. WOODFORD:  Mr. Kunibe. And, the phone call my lawyers received said he wouldn’t meet with me because he didn’t want to interfere. I mean, shareholders are there to speak out. This isn’t a small issue; this is  tobashi  that has gone on 20 years. And, why will they not speak out and say that the directors who were there, who failed to act, should go? That’s a simple thing. Why won’t they do it? Why won’t they do it?

  We can all draw our conclusions.

  QUESTION:  Do you think that major Japanese institutional shareholders do not want you to come back because you exposed the truth and rocked the boat?

  MR. WOODFORD:  That is a conclusion which is very easy to reach. They don’t want people who rock the boat, and that’s what this country needs. That’s what this economy needs.

  But I wasn’t rocking the boat to be difficult; I was rocking the boat to expose massive financial fraud. Do they want to keep it quiet? I don’t know. Ask them.

  QUESTION:  I heard that the number of individual shareholders in Japan has increased these days, and maybe the majority of those new shareholders would support you. What do you think about that?

  MR. WOODFORD:  You’ve still got a problem. The reality for Olympus is it needs a dialogue with the banks. The company is indebted. It’s got no flexibility, really. It’s under-capitalized.

  If there was another earthquake or any issue like that which affected - you know, it’s a bad place for a company like that to be. So, with well over $6 billion in debt, it needs to have relationships with the banks.

  If it was a cash-positive company…

  QUESTION:  But I think that if you became the president of Olympus again, Japanese banks would support you. What do you think?

  MR. WOODFORD:  But I need their support before the proxy fight. At least, if they had made a - why - I have done nothing wrong. I’ve only done “the right thing.” It was their company.

  If they had said, “We appreciate Mr. Woodford exposing this $1.5 billion, and we commend that, and we criticize the directors who allowed…”

  They’re completely passive! I mean I’ve tried so hard. People think I’m crazy for trying as long as I have done. But, if we went to a proxy fight and the Japanese shareholders voted as predicted, then we have a mess, we have two camps. How can you lead Olympus with that status?

  QUESTION:  I am afraid that you were also disappointed by the relatively modest reaction by the Japanese public and society against Mr. Takayama when he said that he had not denied the possibility of the continuation of his presidency.

  MR. WOODFORD:  You know, so many nice people in the street - I have no criticisms of the Japanese people in that sense. I was just - it was a - my sense of outrage seemed at a different level from that of other people. And it’s not because I’m emotionally involved with this. If I heard that about any company, I would think this is bizarre. And the shareholders would never allow it.

  But, Southeastern and Harris Associates, Baillie Gifford, you know, companies, long-term investors, five percent stock thereabouts, all are very clear - all are very clear - the directors should be held to account. But, it seems that you can bow and say, “Sorry,” and then carry on.

  QUESTION:  Do you think that it is a very, very sad thing, not only for Olympus but also for corporate Japan?

  MR. WOODFORD:  Mmm. I feel very sad and melancholic. When, in the case of Olympus, it has such good products but such poor leadership, and Japan has many strengths, many clever, intelligent, people, engineering, and production engineering and manufacturing engineering, it can lead the world. But, that’s not enough anymore; you need strong business mentalities, where the criteria for running a business are based on logic, not self interest.

  QUESTION:  Mr. Takayama also refused to meet with you in late December.

  MR. WOODFORD:  Yes.

  QUESTION:  Is this one of the reasons for your decision?

  MR. WOODFORD:  I think Mr. Takayama, if he does continue, then the story will run indefinitely, and it will be used to illustrate that the clowns can run businesses in this country. I can’t see how Takayama will survive. You know, they’ll just keep playing his press conference where he says, “These payments are good value and appropriate.”

  If he does, then the situation’s even more depressing. Takayama’s not calling the shots; it’ll be the people behind Takayama.

  QUESTION:  When you announced your resignation from the position of director of Olympus, on December 1, you said that your resignation would allow you to have an opportunity to mobilize interested parties and shareholders.

  MR. WOODFORD:  That’s right.

  QUESTION:  Have you been successful in doing that?

  MR. WOODFORD:  Very. Many very strong candidates, and I’m very humbled by their willingness to stand with me.

  But I have to be careful that I don’t destroy reputations and careers for no purpose, and without the Japanese - one of the Japanese institutional shareholders saying, “Yes, this management has to change, we do want a new management team,” then I don’t want to risk damaging them for something which is futile.

  I had hoped that, after the independent panel’s report had publicized its findings, that the institutional shareholders would then speak very clearly and with a loud voice, that these directors have to go. But, they’ve gone along and agreed with this latest management reform committee. How can you have “yes-men” and tainted men and contaminated men influencing the choice of the new directors?

  And you were at the press conference Takayama gave where he said, “No, I’m not, sir - I may stand again and other directors may stand again.” Absolutely extraordinary and bizarre, in the most negative sense.

  QUESTION:  What do you think your chances of success would have been in a proxy fight?

  MR. WOODFORD:  I think we would have won. I think we would have won. But, you could still win, and it would be a hollow victory, because I would still have to run the company, and if the creditors, the banks, are hostile and supportive of the incumbent directors, that would be wrong, that would be undermining, and it was starting to become a story outside of Japan that Japanese shareholders would not vote for me and those overseas would.

  And I don’t want that for this country. I don’t want it to be a story of Japan and overseas. It should never be framed - this was simply a story of somebody who wanted to run the company in the right way, a story of somebody who found fraud, a story of somebody who hoped, when the panel came out, that Japan would react and ensure that its findings were enforced. And I just feel very sad - that’s the word - that that’s not the case. And Japan shouldn’t be an Alice in Wonderland  , shouldn’t allow men like this to act in that fashion.

  QUESTION:  You said that you have decided to withdraw from any further action to form an alternative slate at Olympus.

  MR. WOODFORD:  That’s right.

  QUESTION:  Does that mean that you will allow Mr. Takayama to participate in choosing the next president of Olympus?

  MR. WOODFORD:  (Laughs.) I’m not a director of the company. I’m just one person who loves this company. The people who will allow that to happen are the Japanese institutional shareholders, not me. We know what the overseas shareholders say. That’s their decision. It’s always been their decision.

  QUESTION:  Does your decision mean that you have given up on the future of Olympus?

  MR. WOODFORD:  No, I’ll never give up on the future of Olympus. I’ll never give up on the future of Olympus.

  QUESTION:  Why do you decide now?

  MR. WOODFORD:  Because, I have to either publicize the names, now, which we’re in a position, closed to being able to do that. Or, if I’m not prepared to do that, and the consideration of the Japanese shareholders - when you analyze and consider that reality - I had hoped, again, that there would be many approaches from different people towards them. But, if none of them are prepared to criticize the existing directors, then I don’t think that is a basis to return to run a company.

  If Japan’s institutional shareholders have that collective view, if that’s the party line, if that’s the club’s view, then I think I could do more damage than good by proceeding with a proxy, and winning a proxy.

  QUESTION:  Is there any possibility that you could work for Olympus in the future, despite this decision?

  MR. WOODFORD:  I had always considered that a possibility.

  QUESTION:  Would you consider appearing as a non-executive director on a slate prepared by another party, such as Southeastern?

  MR. WOODFORD:  I don’t know. I’d have to give that some thought.

  QUESTION:  Don’t you regret raising concerns with Mr. Kikukawa and other directors, given that it resulted in your dismissal?

  MR. WOODFORD:  No. I’d do it again and again and again.

  QUESTION:  Do you regret something of your ordeal?

  MR. WOODFORD:  I regret the hurt I have caused my family, but I would do it again because it was worth it. It was the right thing to do.

  And, again, I’ve seen so many positive things as well, so many good people, so many fantastic comments from the employees to me, and I just feel sorry that I haven’t been able to deliver their expectations.

  QUESTION:  Last summer, you had an option to leave the Board of Directors of Olympus quietly. But, you chose an option, ultimately, to become a whistleblower. Don’t you regret that, after all, even if not only you but also your wife has suffered a lot?

  MR. WOODFORD:  I don’t think you can look at it in that simplistic manner. If you ask questions and the answers tell you there is something very wrong, you can’t walk away from that, or you shouldn’t walk away from that.

  So, I have to look at my children, and my friends, and my colleagues, and I would do the same again. And, I would encourage other people to do that.

  And remember, there are other whistleblowers within Olympus who gave the information to FACTA in the first place. And I commend these individuals. If there’s wrongdoing - if there’s wrongdoing - your loyalty is to the greater good, not to any specific individual. And that’s the sickness which Olympus got in, which is that people tolerated or turned a blind eye.

  And I return to the remaining directors of our company. They were there when the decisions were made. Almost all of them were there. One or both decisions. They were there and they chose to do nothing with the six letters and the PwC report. That I don’t think I would have predicted.

  Again, in any other country, capitalist country, in the world, they would have long gone, they’d have been arrested, and the guilty parties and the others would be totally discredited and barred from being directors ever again.

  QUESTION:  Some people might think that the possibility of the delisting of Olympus from the Tokyo Stock Exchange will increase if you do not join the Board of Directors. Aren’t you afraid of that?

  MR. WOODFORD:  I don’t think that’s a factor.

  QUESTION:  I am very worried that the image of Japan in the world will decline, because it will appear that justice loses and injustice prevails. What do you think about that?

  MR. WOODFORD:  That’s true. That’s true.

  QUESTION:  Do you have any message to the Japanese general public?

  MR. WOODFORD:  I love your country very much, but you must stand up and protest and shout and not allow these issues to be managed in this way and make representations, through whichever channels you can, because Japan needs a strong economy, a strong private sector. It needs vitality. And what’s happening is insulting. It’s insulting to everyone in this country who is decent and cares about the right issues.

  QUESTION:  Do you have any message to the employees of Olympus?

  MR. WOODFORD:  My heart will always be with you. Keep making the products customers want to buy. And I hope what has gone on in the last three months makes it likely that the existing directors will eventually go, and you will have management of integrity. That is my hope.

  QUESTION:  How do you feel now, after you have worked for Olympus more than 30 years?

  MR. WOODFORD:  It’s a very traumatizing feeling and it’s quite a brutal end. So, I feel a great sadness inside me.

  QUESTION:  What are you planning to do on this trip?

  MR. WOODFORD:  This trip, I’m meeting with some of those who were slate members, to explain, and also to talk to other advisors, and just explain the reasons and the reality. But, I’m not prepared to risk damaging the reputation or careers of those who are prepared to stand on the slate, because we should have seen a change because of the independent panel’s findings. We should have seen that change, but it seems, again, that the predictable end of this story is, as many people told me, we will never win because the institutional shareholders won’t support you.

  I had hoped this time it was going to be different, but I was wrong. But, I would do it again. It was right to try. And, at some point, accountability in Japan will increase.

  QUESTION:  Many people in Japan think that the accountability and corporate governance will improve because of what you have done.

  MR. WOODFORD:  I hope so. I hope so. But, the evidence, to me, is depressing in that, again, the institutional shareholders have not made one word of public criticism against the directors who failed to act. Takayama is only there because he is allowed to be there by the shareholders.

  QUESTION:  What are you going to do after? Will you get another job in business or in the world, in the future?

  MR. WOODFORD:  I don’t know. My mind and my soul are still with Olympus. I need some time to think that through. But I love industry and doing things, and I will go back to work. But, again, I feel a sense of bereavement at the moment, and until that has passed, I just need some time to think clearly and allow some weeks to pass, before coming to any conclusions.

  QUESTION:  To tell the truth, I have seen a lot of whistleblowers, corporate whistleblowers, in Japan, and maybe in the world. And I have found that the majority of whistleblowers could not be happy with the results. Of course, things have been getting better because of their whistleblowing. But they, themselves, tend to - for them, it has been very difficult for them to be happy with -

  MR. WOODFORD:  They become a sacrifice, right?

  QUESTION:  That’s right.

  MR. WOODFORD:  I don’t feel that. I don’t feel that I’m a sacrifice. I feel - four directors have gone. Prosecutions, I’m sure, will be progressed. And, we will see, I think, further action by the UK and the US authorities. I mean, it’s not that nothing has happened.

  And I do think that the 11 remaining directors will have great difficulty remaining in office. And if they don’t, then it ridicules Japan, not just Olympus.

  So I don’t feel unhappy, in that sense. Again, I feel a lot has been achieved. But it’s not the happy ending I had hoped for.

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