A damning report into the $1.7bn accounting scandal at Olympus has been published. Former CEO Michael Woodford tells Channel 4 News that the company’s auditors are partly to blame.
The report by an independent panel called some of the Olympus executives “rotten to the core” but found no link with organised crime, namely the Yakuza.
The lack of such a link may help the 92-year-old maker of cameras and endoscopes remain listed on the Tokyo stock exchange.
“The core part of management was rotten and the parts around it were also contaminated by the rot,” the six-person panel said in its report, which was commissioned by Olympus.
“Olympus should remove its malignant tumour and literally renew itself. In the worst possible sense, the situation was that of the tribal culture of the Japanese salaryman,” it added, referring to a culture of absolute corporate loyalty.
The panel placed the blame squarely on the executive management but also criticised external auditors who signed off on the books of the company.
Olympus has lost about half its market value since it fired British CEO Mr Woodford in October.
Mr Woodford, who is seeking shareholder and would-be investor support to oust the board and return to his job, said he was pleasantly surprised at how “explicitly condemning of the existing board” the report was.
“The language is much more direct and explicit than I anticipated and I think the report by the panel has been a very positive development,” he told Channel 4 News, adding that it was “almost inevitable” that the entire board would be dismissed.
Mr Woodhouse added that despite his initial reservations about how the scandal would be dealt with by the relevant Japanese authorities, he was certain that the appropriate efforts would now be made to clear up the mess.
“I met with the tripartite of the Japanese prosecutor, the Tokyo Metropolitan Police and the SESC and I had low expectations, but they all looked me in the eye and said: ‘Mr Woodford, we will deal with this, it wont be pushed under the carpet and we will follow the money flows as well.'”
The report criticised Olympus’s auditors – KPMG AZSA (active until 2008) and Ernst & Young ShinNihon (from 2008).
“Past (Olympus) presidents had low esteem for transparency and governance, and standing up to them to speak the truth meant you risked being put out to pasture, which is apparent from what happened to Woodford,” the report said.
Mr Woodford added that opinion in Japan is that “everybody wants Olympus to stay a listed company.”
But that, he said, “is dependent on is not just the accounting, it’s the two large firms of auditors, KPMG and Ernst & Young [who] are going to be very questioning and wary and super-sensitive because of the context of signing them off.”
KPMG AZSA has issued a statement saying that it conducted audits of Olympus’s financial statements in line with Japanese auditing standards, while Ernst & Young Nippon said it believes the panel did not find any problem with its audit.