What more you would do if you were the decision

maker?
Michael C. Woodford shocked his colleagues by leapfrogging scores of executives to become the
company’s first non-Japanese president.

Tsuyoshi Kikukawa was an Olympus hand of almost half a century, with a decade at the
company’s helm, credited with kick-starting its digital camera business, and long a witness to its
ups — and downs. But when the English president, Michael C. Woodford, confronted the
Japanese chairman, Tsuyoshi Kikukawa, over $1 billion in murky payouts and questionable
acquisitions Olympus had made during Mr. Kikukawa’s tenure, their worlds clashed.

And so began a boardroom battle that has cost both men their jobs, wiped out over half the
company’s stock market value, and once against cast a harsh spotlight on seemingly grave lapses
of corporate governance at a top-tier Japanese company.Now we will discuss what we could do
if we were the decision maker:

1. Analyzing company’s corporate governance: Mr. Woodford, proved his name by

successfully expanding Olympus's international medical business. In 2011, he appointed
Olympus' first foreign president and chief operating officer. Mr. Kikukawa was lauded to
introduce Western-style management to the company. While talking about his
appointment in Tokyo Headquarter, Mr. Woodford dint discuss about any terms or
anything while accepting the offer from Kikukawa. And soon realized that he lacked the
power to make fundamental decisions. Not only this, Mr. Kikukawa used to control all
the top management and board members. The 1 st mistake of Woodford was accepting C-
suite member offer without analyzing or understanding the running corporate governance
system in Tokyo Headquarter. For this puppet kind of corporate governance where
Kikukawa was the puppet master, Woodford dint have any floor to take any decision to
change any existing system or culture at Olympus. We would have done at least a generic
research or analysis before accepting a big role in an organization. Also, with proper
research and knowledge regarding the existing corporate governance and culture we
would have negotiated or discussed with the CEO before any final decision. Because we
 firmly believe that a company with a strong culture can achieve virtually anything.
Culture affects employees’ performance much more than any other measure we can take.
2. Creating democratic and freely speak up culture: Olympus had a corporate
atmosphere where people could not freely speak up was formed, the mindset of
personalizing the company prevailed, and the sense of duty of loyalty towards
shareholders was sparse among the management. The mindset of executives was so blunt
as not even to even sense any issue in the face of management and transfer of the
enormous amount of funds, as well as enormous loss. They did not investigate the cause
and determine the person responsible or pursued liability at all in the face of each
fraudulent practice. These executives can be inevitably viewed that they had mindsets to
avoid trouble, and only focus on those businesses that they were in charge of, and survive
through their job without going through real trouble, whenever they sense some kind of
trouble. Woodford has witnessed this while Mori has replied with an answer of he
worked only for Kikukawa and he was only loyal to him from the question of all the
illegal investments. We would have tried to develop a democratic and free work
environment for employees. Where they would be able to take decisions, raise flag,
saying NO to any wrongdoings and everything for the betterment of organization.
3. Reducing communication block between employee and top management:
Communication block between employee and top management in Olympus, increased the
domination power of top management and misusing it. Because the gap of power
between Top management and employee was wide, sometimes it was not easy to
employee to object and correct such misuse practice from their “boss”. However, we
would increase power to employee to correct and raise objections to their “boss” and
reduce the abusing power in the top management.
4. Brushing up Long term employment culture: In Olympus case Long term employment
culture tend to be misused by the top management to create no democracy culture, they
could easily pressure the employees to not speak-up as they feel open up the scandal
same as open up the disgrace of your family. Obviously this culture does not work for
Michael C. Woodford who does not Japanese person and open-up the case eventually in
public. The noble concept behind long term employment was converted according to the
management’s interest and Woodford has noticed this few times. From decision maker’s
 position, we would revamp the long term concept in front of employees and motivate
them to help the organization to have a healthy & honest growth.
5. Incentivizing top managements: Giving incentives to the top management, providing
more financial incentives to people in top management would compel them to work
harder to improve corporate performance and take shareholders' interests more to heart.
Financial incentives also have an influence to change the payment system from seniority-
based payment being resulted of long-term employment toward the performance-based
payment.
6. Bringing in Outside directors: The scandal at Olympus Corp triggered by weak
management system: the lack of strong independent oversight on most boards. Olympus’s
board was typically stacked with insiders. Twelve of Olympus’ 15 board members are
company executives, and one of its three outside directors failed to pass a test of
independence set by top proxy voting firms. It is said that that too much control was
given to internal members. To avoid these problems of manager’s having their own
interests in mind, above company interests, the Board should be dominated by a majority
of external members. Outside directors balance power from top management and increase
transparency in the board room. They are supposed to represent shareholders' interests,
not the company's. These members could then exert judgment based on the best interests
of the company and its stakeholders.
7. Deploying external auditors: Tsuyoshi Kikukawa allowed few employees from
accounting & investment dept. to commit the fraud. It is clear that the internal company
auditors did not discover and rectify the wrong. This may be due to the head of the Audit
Office had rights to control the accessibility of his subordinates to the financial data. The
fraud was shielded by him, as he falsified accounts to conceal the losses. Despite being
aware of or suspicious of the practices taking place, employees were not empowered to
expose the improper accounting techniques being utilized. Olympus hindered proper
audits by providing incomplete documents and counterfeit statements to its external
auditors. Our decision from Woodford’s position would be deploying experienced
external audit firms and closely monitoring the process. Also, making sure the audit
process takes place half yearly.