Olympus chief quits over fees row

26th October 2011, Comments 0 comments

The under-pressure chairman and president of Japan's Olympus resigned on Wednesday with the company mired in crisis over a fee payments scandal triggered by the sacking of its British chief executive.

Tsuyoshi Kikukawa's resignation comes less than two weeks after he took control of the company following the ouster of former president and CEO Michael Woodford.

Olympus shares have since fallen by more than 50 percent.

Briton Woodford contended that he was removed after querying the size of payments made by Olympus in deals between 2006 and 2008.

Kikukawa will become a director without executive rights, the company said in a statement, adding that director Shuichi Takayama will replace him as president.

"As we have troubled our customers, business partners and shareholders over a series of press reports and a slump in share prices, chairman and president Tsuyoshi Kikukawa today returned his titles as well as his right to representation," the Olympus statement said.

Olympus shares have lost more than half their value since the ousting of Woodford on October 14, with the questioned payments falling under the media spotlight and company explanations leaving investors dissatisfied.

Among four deals queried by Woodford was the $1.92 billion acquisition of British medical-instruments company Gyrus Group in 2008 and the $687 million that Olympus has admitted it eventually paid an adviser on the purchase.

Woodford commissioned a report on the deal from accounting firm PricewaterhouseCoopers (PwC) that queried why the fee was so high.

It totalled more than a third of the company's purchase price, much larger than the one or two percent normally charged in acquisition deals.

Woodford also queried Olympus' purchase of three Japanese companies unrelated to its core precision equipment businesses for hundreds of millions of dollars that it later wrote down.

At a hurriedly arranged press conference, a statement was read out from Kikukawa, who did not attend. "We have done nothing illegal, but we will create an independent committee to establish the facts," it read.

New president Takayama, who joined Olympus in 1970, defended the deals and said he was not aware of any investigations by overseas authorities following media reports the FBI was probing the scandal involving the near $700 million advisory fee payment.

The 61-year-old said he was confident the stock price would recover because the fundamental value of the company had not changed. Olympus has pledged to launch a third-party inquiry into the deals.

"We want to be able to recover the trust of society and customers as soon as possible," he said.

The impact of Kikukawa's resignation alone was unclear, Woodford told Dow Jones Newswires shortly after the company released the statement.

"All board members acted as one entity," Woodford was quoted as saying, noting that Takayama, the new president, was one of the board members who voted to remove him.

Woodford was dismissed only six months after being appointed president and two weeks after he was also named chief executive.

The 30-year company veteran, Olympus' first non-Japanese president and chief executive, said he was removed after he wrote to Kikukawa and urged him to resign over the payments, citing major governance concerns.

Investors have pushed Olympus for answers. On Wednesday, its shares dived 7.56 percent to 1,099 yen ahead of the announcement of Kikukawa's resignation.

Olympus has denied any wrongdoing and repeatedly blamed Woodford's demotion on "a big gap" between him and other directors on management and strategy, instead of his concerns over the deals.

© 2011 AFP

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