THE OLYMPUS

SCANDAL OF 2011
WHAT IS OLYMPUS CORP. ?
 Founded on October 12, 1919 by Takeshi Yamashita
 First main purpose was specializing in thermometers and
microscopes
 Now specializing in cameras and medical devices
The Scandal
 Michael Woodford went from CEO to Whistleblower
 Olympus bought 3 companies in 2008 for $800,000,000, only
to write down three quarters of their value by the end of the
financial year
 Gave nearly $ 700,000,000 in “Advisory Fees” to an entity in
the Cayman Islands whose ownership and legal standing
were unclear
 Mr. Woodwork learned about the allegations through a
Japanese business magazine
 The issues were never brought up in meeting within the
company
Early 1990s: After losing money due to yen strength, Olympus creates a
special purpose vehicle to buy battered securities at market value. The cost
to fund this scheme would increase over time.

2006-2008: Olympus spends $773 million to buy three tiny domestics start-
ups, which had no relation to the company’s core business

2008: Olympus pays $687 million advisory fee on it’s $ 2.2 billion purchase of
British Company Gyrus.

October 2011: It takes new foreign CEO Michael Woodford just months to
identify these fraudulent payments. Woodford is fired. The stock starts
tanking. The chairman resigns.

November 2011: New president Takayama comes clean about the fraud. He
blames former chairman Kikukawa as well as Vice-President Hisashi Mori
and internal auditor Hideo Yamada. The stock price closes down 70% in three
weeks.
Response to the Crisis
 Media was not biased, but neutral. Stated the facts.
 Long term employees felt betrayed, angry and shocked
 Customers also felt betrayed
 Government also tried to cover up the allegations
Recommendations
 Hold regular audit on the company’s financial
records
 Create an anonymous employee crime hotline
 The company should be up front and honest about
the crisis.
 Focus on reputation management
 Automated Accounts Payable System