Case Study 4.4 – Michael Woodford and Olympus

The Urban dictionary defines citizens of Liverpool, England as “scousers” who are “generally welcoming, fun loving, hardworking and a talented breed of people.”  Paul McCartney is a scouser, and so is Michael Woodford, the former CEO of Olympus.  Woodford worked in a British subsidiary of Olympus – KeyMed – for most of his career, and after 30 years as a “salaryman” was tapped to be the first gaijin (non-Japanese) president of the parent company – Olympus.  His mentor was the chair and company CEO, Tsuyoshi Kikukawa.  Kikukawa saw Woodford as a no-nonsense Western businessperson who could help with cost-cutting and other challenging strategies Japanese leaders were reluctant to enact.

Michael Woodford’s company turnaround was going as planned until he discovered a distressing story regarding Olympus, by a little-known Japanese business magazine – Facta.  The article detailed how Olympus wrote off approximately $1.7 billion in company debt by significantly overpaying for three “Mickey Mouse” organizations in 2008.  The difference between the book value and the inflated value was considered “goodwill”, which Olympus intended to write off over a 10-year period which would cover up their losses.   One company sold face cream.  A second made microwave dishes, and the third was a recycling business.  In addition to this, Olympus paid a $687 million consulting fee to acquire another company – Gyrus.  The typical fee for this type of recommendation was approximately 1% of the $2 billion purchase.  That would equate to $20,000,000, paid only after thousands of hours of due diligence, and numerous binders of data compiled by the consultant were delivered to the client.  Instead, Olympus agreed to an amount equaling 36% of the purchase price for a one-page memo by the consultant.  Nice work if you can get it.

As a values-based leader (VBL), Michael Woodford felt compelled to dig deeper and immediately scheduled a lunch meeting to discuss his concerns with Kikukawa.  The meal showcased a stunning array of sumptuous sushi at the head table.  Instead of his favorite raw fish, Mr. Woodford’s plate featured a “manky tuna sandwich.”  The message was clear – “Be quiet, and don’t stick your nose into this business.”  As a VBL, Michael Woodford didn’t heed this threat and hired PwC to conduct an audit, confirming his fears.

After another damning article in Facta – this time linking Olympus’ fraud with “anti-social forces” (read: the Japanese crime syndicate known as the Yakuza) – Mr. Woodford feared for his personal safety.  Undeterred, Woodford sent letters to Olympus’ board, calling for Kikukawa’s ouster.  The next board meeting was supposedly scheduled to address the topic, but instead, upon entering the boardroom, Kikukawa called for a snap vote to fire Mr. Woodford.  The board seemed eager to please Kikukawa and terminated their gaijin president on the spot. 

Mr. Woodford attempted a proxy battle to gain control of Olympus, but that too failed.  He returned to the United Kingdom to be with his family.  Unfortunately, his former Olympus friends weren’t as supportive.

“Once I had been ousted from Olympus, my relationship with many of those left on the inside became strained. Former close colleagues whom I’d known for years suddenly treated me like some sort of leper and studiously avoided all contact with me. There seemed to be an insidious pressure on some to have nothing to do with me. I had been deemed a contaminant. I was suddenly persona non grata and couldn’t understand just what I had done wrong.”[i]

As a proud “scouser”, Woodford’s favorite football (soccer) club was Liverpool, nicknamed “The Reds.”  The Red’s club’s theme song played before each game was a rousing rendition of Roger and Hammerstein’s “You’ll Never Walk Alone,” from the musical Carousel.  The irony is that Michael Woodford, along with many other whistleblowers “would always walk alone.

CONCLUSION:

How whistleblowers are perceived might depend on which party walks into an attorney’s office.  In 2004, Victor Schachter, an employment partner at Fenwick & West, representing organizations stated, “I’ve seen a mini explosion of whistle-blower claims by people who are marginal performers, if not malingerers.”  Jeffrey Ross, an attorney representing whistleblowers had a different point of view.  “[O]nce high-performing, well respected employees blow the whistle, suddenly they become, in retrospect, terrible, if not incompetent employees.”  Why is there so much “sturm und drang” about this in the workplace?  Principled principals should encourage reporting potential violations, raised in good faith, as soon as possible.   Learning about these incidents early on can help VBLs tamp down these smoldering sparks before they become raging infernos. 

Values-based leaders should create the culture in which people like Michael Woodford and others can be role models for courageous behavior. These men and women can act in the public interest, while still being considered loyal to their organizations.

[i] Michael Woodford, Exposure: Inside the Olympus Scandal: How I went from CEO to Whistleblower, (New York: Portfolio/Penguin, 2014), 111.