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The Olympus Corp. trial has started and Tsuyoshi Kikukawa, the former chairman, pleaded guilty to covering up financial losses. Sony Corp. has agreed to take a roughly 11% stake in Olympus, securing the company’s future. So, the worst outcome, which Kikukawa himself feared – that the company would be destroyed, and the livelihoods of many employees lost – has not transpired and it would seem justice is being served.
Reading former Olympus President Michael Woodford’s autobiographical account of the whole incident, I can’t help wondering if there might have been a less nerve wracking way of resolving the firm’s problems. A key moment in the book for me is where Kikukawa, Woodford’s sponsor, realizing that Woodford is in effect asking him to resign and accept responsibility for the cover up, asks “do you hate me Michael?”
The question is incomprehensible to Woodford, who does not see his accusations as personal, but part of his fiduciary duty as a director of the company to make transparent what has happened and ensure the guilty take responsibility.
To Kikukawa, I can imagine the cover up was a desperate attempt to save the company, with no personal gain involved. He is unable to disentangle his own fate and duty as a director with the company’s fate and his responsibility for its employees. An attack on his behavior seems like an attack on his person, by someone who does not seem to care whether the company lives or dies.
Woodford makes it very clear that he does indeed care whether Olympus lives or dies, but believes that the process of exposure, punishment and redemption will allow the company to be reborn. Many executives bred in the Anglo Saxon capitalist world are of a similar mindset – able to distance themselves from the company they manage, and to examine it objectively.
There is a less admirable side to this – a tendency to march into a company, believing that a bold reorganization, a sweep with a new broom, brushing out some of the people associated with the past, and putting in your own men (and it always does seem to be men) will get the results needed. So long as the numbers are good, the shareholders are happy. Casualties fall by the wayside, but can pick themselves up and start again elsewhere.
This is still not the case in Japan, and simply marking this down as a case of inadequate corporate governance ignores the fact that Japan does have corporate governance standards, which can and should be enforced. Furthermore, the Japanese corporate environment has become as tricky as that of the US or Europe. There are regulations governing overtime, diversity and “power harassment” that new foreign bosses ignores at their peril.
There have been too many cases of failure of foreign bosses in Japan for it to be wise for Japanese companies to continue to appoint foreign executives in the hope that this will somehow magically globalize the company. Foreign executives need intensive support and guidance, such as training in the workings of Japanese boards and coaching from those experienced in managing Japanese employees, if they are to make a difference without destruction.
This article originally appeared in the October 8th 2012 edition of the Nikkei Weekly
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