Japan: Business as usual, but not for Olympus whistleblower Michael Woodford

Japan: Business as usual, but not for Olympus whistleblower Michael Woodford Michael Woodford, former President and Chief Executive of Olympus Corporation, pictured at his home in London. Susannah Ireland / The Independent

TOKYO —

Michael Woodford grew up in Liverpool and joined Olympus Corporation as a medical equipment salesman. He rose swiftly through the ranks to head the firm’s UK and European operations before being appointed president and chief operating officer in April 2011. The first Western “salaryman” to become the leader of a giant Japanese corporation, he was named chief executive officer in October of the same year.

Two weeks later, Woodford was fired. He had been asking questions about nearly $2 billion in payments to three minor, “Mickey Mouse” businesses, and fees that were supposedly paid for advice on mergers and acquisitions. The Olympus board of directors could simply not give him an answer.

After the full story of Woodford’s bravery and whistleblowing activities came to light, The Sunday Times, The Independent and The Sun all recognised him as 2011 business person of the year. In March 2012, he was named Person of the Year at the FT ArcelorMittal Boldness in Business Awards. This was the first time in history that four national newspapers all chose to honor the same individual. In 2012, he published Exposure: Inside the Olympus Scandal, and a screenplay for the film version of his experiences is currently being developed by Film4.

Woodford, 53, lives in London with his Spanish wife, Nuncy, and their two children.

How has your life changed, both personally and professionally, since the Olympus scandal came to light?

Totally. I now spend my time speaking around the world, as I care passionately about sharing the lessons of the Olympus scandal and dedicating my time to my human rights and road safety charities. I’m busier than ever before!

In what way have those activities been colored by your experiences at Olympus?

I have a more jaundiced view of human nature. Experience has taught me that most people only care for themselves and their immediate families and won’t get involved in things that are “difficult”. But that also makes me feel thankful for the few people who did help me. I want to give back now, with my time and money, to help those in desperate need. In each of the last two years, I have given away a seven-figure sum to the charities that I support because that is what I care about. I have been offered two board-level jobs, but that is not what I want to do any more. Life is too short. I did want it at the time [when I was at Olympus], but I don’t want to do it again. I have realised that the world is a big and interesting place and I don’t want to live by the confines of corporate life.

What changes have taken place in Japan as a result of the Olympus case?

Nothing has changed in Japan. I find the secrecy law that Prime Minister [Shinzo] Abe has passed profoundly disturbing. One cannot say that things will never change, but the behaviors of blind obedience and deference are deeply ingrained within corporate Japan.

Ideally, what would you like to see happen?

I think it’s an issue for Japanese society. Japan is still very closed in its attitude toward the rest of the world and change cannot come from outside; it has to come from within. Young people in Japan need to be promoted not based on a hierarchical system, but on ability and talent. There should be more opportunities for women. Right now, there seems to be a lot of rhetoric but nothing meaningful is happening. In my opinion, Abenomics is just creating an asset bubble. There needs to be independence, a freedom of the spirit and a meritocracy, but change has to come from within.

What influence do you think Japan’s corporate culture and media had on the Olympus scandal and breaking the story?

Huge. I once asked a senior Japanese financial journalist what would have happened if I had given him the file that I gave to Jonathan Soble of the Financial Times. He smiled and said his editor would never have allowed him to write the story. In the early weeks of the scandal, much of the Japanese media acted like they were the press office of Olympus. This is something I find desperately worrying when, in any society, there exists a powerful need to be held accountable. If Japan goes the other way, such as with this secrecy law, then it will just make whistleblowers and journalists even more uncomfortable.

A free press — that is what matters most. It still shocks me that none of the mainstream media picked up the original story in FACTA [the Japanese economic monthly that first exposed inconsistencies in Olympus’ accounting]. That tells you everything you need to know about the relationship between the media and the powerful in Japan.

You are advocating more protection for whistleblowers, even compensation. Has there been any progress on this front?

I have been consumed by my membership of the Whistleblowing Commission, which issued a report on the issue on 27 November. I was the president of a large multinational corporation, which made it much more likely that people would actually listen to me, but the real concern is how you make it easier to come forward in reporting wrong-doing for, say, a junior management accountant with three children and a big mortgage.

The commission’s work has been acknowledged as the UK’s most comprehensive review to date of whistleblowing policies and practices, and it calls upon the secretary of state to issue a code of practice to be adopted in all UK workplaces. Off-the-record discussions with ministers suggest that the government will be extremely receptive to the report’s findings.

Are you confident the commission’s efforts will genuinely protect whistleblowers in the future?

I believe most reasonable people will accept that whistleblowing is something to be nurtured, in that it can facilitate the early detection and prevention of wrongdoing. After experiencing my life spiralling out of control, with the fear of losing everything, my motivation now is simply a desire to share the lessons of the Olympus scandal as widely as I possibly can, and in doing so to make people think, and hopefully make it a little easier for the next person who needs to blow the whistle.

Whilst Britain can clearly do better, it already has some of the best protection in the world for whistleblowing, and what I’m doing with the UK commission sadly won’t help anybody in similar circumstances in Japan.

Do you have any advice for potential whistleblowers who want to avoid the spotlight?

To be honest, if they are in a junior position in a Japanese company, then given the way that the law and society is, I would not advise them to do it. My experiences have made me skeptical and cynical. If they are more senior, then I would, but they need to make sure that their voice is heard and that would mean talking to FACTA and the press from outside Japan.

What kind of reception have you received in the business world since moving back to the UK?

Many of the world’s largest companies now employ me as a consultant, to advise them on how not to let the same thing happen in their corporation. That is interesting to me, as I want to bring about change. They have to demonstrate that they have a whistleblower line that is both independent of the executives and is known about by the people who work for the organisation.

One company in Japan even asked me to work for them, which was a positive surprise. But I suppose there will always be mavericks and independently minded people everywhere.

What is the status of the book and how is the film coming along?

The book is already a best-seller. It is being translated into Chinese and the German edition comes out in March. The movie is in development with The Ink Factory, a film production company set up by the sons of author John Le Carre, along with Film4, and there are rumors that Colin Firth is interested in the lead role!

Do you plan to come back to Japan? Would you feel any legal, physical or other threat if you did?

I have already been back five times since I was fired because I miss Japan. I have a strong affection for the country and its people. I use the word “love” very carefully, but I really do love the Japanese people, and that feeling has only grown since I was dismissed, as it was the men and women on the street who touched and moved me. I don’t feel there is any great risk now, and I will definitely return to Japan.

  • 19

    zichi

    I find the secrecy law that Prime Minister [Shinzo] Abe has passed profoundly disturbing.

  • 21

    Sensato

    I once asked a senior Japanese financial journalist what would have happened if I had given him the file that I gave to Jonathan Soble of the Financial Times. He smiled and said his editor would never have allowed him to write the story. In the early weeks of the scandal, much of the Japanese media acted like they were the press office of Olympus.

    Great interview. I am pleasantly surprised that the senior Japanese financial journalist was so candid when he spoke to Woodford. Japan desperately needs its media to play a "fourth estate" role, as a custodian of the public interest and a watchdog on the actions of government. Lacking such a "fourth estate," society here will continue course as a highly dysfunctional pseudo-democracy.

    Through press clubs (kisha kurabu) and extremist intimidation, the media to me seems like little more than a lapdog for government and corporate interests. Stories like the Olympus scandal break in Japan only after the overseas press reports on them. Still, I see nothing but apathy, and little with respect to outrage, from the nation's citizens.

  • 12

    marcelito

    He makes great points on Abes secrecy laws, the impotence of Japanese media and the J-Inc culture. His comment that "nothing has changed in Japan since Olympus " is a truly sad indictment of the fossilized business culture here. Think Ill get his book. Anyone read it yet?

  • -33

    wasabizuki

    Ofcourse nothing has changed. How can it when the white-dominated business culture of Goldman, leighman, etc go on with business like usual. What he exposed is the culture of the business world itself. The irony is that Japanese companies place puppet white executives in order to have a white face for B2B liaisons. What they didn't realize is that they won't be loyal like a Japanese exec would be. this whistleblower sought revenge for his demotion and capitalized on the notoriety he received. Not to mention he ruined the lives of many Olympus employees and investors trying to make an honest yen.

  • 2

    theeastisred

    Think Ill get his book. Anyone read it yet?

    It is excellent. So excellent, in fact, that I went out and bought a second copy as I had annoyingly lost the first one before finishing reading it!

  • -13

    Chubbinessfan

    He made out like a bandit from the scandal. not like he is telling us anything we didn;t know about Japanese business.

  • 21

    theeastisred

    Wasabizuki:

    Where do we start?

    white-dominated business culture

    Olympus was more of an isolated case than an example of business culture, but to the extent it was, it was an example of Japanese business culture, which is most certainly not 'white-dominated' (and what a weird phrase to use anyway!)

    Japanese companies place puppet white executives

    Agree there could have been an element of tokenism about this, but that is not his fault.

    What they didn't realize is that they won't be loyal like a Japanese exec would be.

    Yes he was not loyal to his immediate predecessors, who arranged and sustained the cover-up of false accounting, which is by the way a criminal offence and resulted in criminal prosecutions thanks to Woodford's efforts. You could argue that those more recent executives were loyal to their predecessors who wasted huge amounts of money investing the company's assets in instruments they didn't understand, but where is the value in being loyal to people who threatened the existence of the company with their incompetent actions?

    sought revenge for his demotion and capitalized on the notoriety he received.

    He wasn't demoted, he was summarily dismissed. He did not receive any notoriety. He rightly received praise for his bravery and honesty in exposing the utterly rotten situation at the company which he unexpectedly found himself in the middle of.

    he ruined the lives of many Olympus employees and investors trying to make an honest yen.

    Don't you think those responsible for the original losses through investment failures, and the cover-ups which let to the criminal activity of false accounting, were more to blame for any harm done to the employees and investors than the person who exposed them? Do you blame the arresting officer if a bank robber or a murderer is caught?

  • 12

    Strangerland

    He made out like a bandit from the scandal. not like he is telling us anything we didn;t know about Japanese business.

    On the contrary most of the world doesn't know about this side of Japanese business. And if Japanese businesses want to do business overseas, then foreign people doing business with them should know what they are dealing with.

  • 1

    avigator

    And we thought North Korea was a regimented country.

  • -3

    oldsanno

    I once asked a senior Japanese financial journalist what would have happened if I had given him the file that I gave to Jonathan Soble of the Financial Times. He smiled and said his editor would never have allowed him to write the story

    The story was first reported in a Japanese paper.

  • 2

    marcelito

    oldsanno - what planet are you living on ?

  • 11

    Sensato

    The story was first reported in a Japanese paper.

    @oldsanno

    I checked on this.

    I think the story you are referring to was released in August 2011 by Japanese business magazine Facta in an article titled "オリンパス 「無謀M&A」巨額損失の怪" (Olympus — mystery of enormous losses with "reckless" M&A), which reports on Olympus buying three small venture companies for close to Y70 billion. (Here is the link: http://facta.co.jp/article/201108021.html).

    From what I understand, that story in Facta prompted Woodford to dig deeper, after which he uncovered "$1bn in acquisition-related payments that [as Woodford asserted] was used secretly to cover losses on investments dating back to the 1990s. " That story was reported by Soble in the FT on November 8, 2011. (Link: http://www.ft.com/cms/s/2/8745be6a-09af-11e1-a2bb-00144feabdc0.html#ixzz1d5bogLCn)

  • -5

    oldsanno

    Earth to marcelito
    August comes before September, October, November and December.

    The question is "what planet are you and so many others on?" Why didn't you know a simple fact? Because this white guy and all the others don't want you to and you have no interest in the truth if they don't fit your preconceived notions of superiority.

  • 7

    theeastisred

    Oldsanno:

    As helpfully documented by Sensato above, and as everybody (except you?) already knew anyway, the story was broken in Facta, which is indeed Japanese but is an independent magazine, definitely not part of the mainstream Japanese media and not 'a paper'. Those facts are very significant. After Woodford went to the FT and other non-Japanese media, it was eventually picked up by the mainstream Japanese media. Not to say that they couldn't have run the story sooner, but the fact is that in this case, they did not.

    And please stop referring to all this nonsense about 'white guys', 'white-dominated' business culture etc along with your friend Wasabizuki from yesterday on this thread.

  • 8

    Sensato

    The story was first reported in a Japanese paper.

    August comes before September, October, November and December.

    @oldsanno

    Woodford himself has many times stated that the August 2011 Facta article is what prompted him to dig further, resulting in information he provided to Soble for the subsequent November 2011 FT article.

    The original Facta article centered on suspicions as to why Olympus would pay such high prices for three small companies. It was then Woodford who uncovered the exorbitant amounts earmarked as "acquisition-related payments" used by Olympus execs to cover past investment losses, first mentioned in the FT article.

  • 9

    avigator

    Great job Mr. Woodford.

  • -10

    oldsanno

    I once asked a senior Japanese financial journalist what would have happened if I had given him the file that I gave to Jonathan Soble of the Financial Times.

    He didn't give it to "a senior Japanese financial journalist ". Why?

    Those facts are very significant. After Woodford went to the FT and other non-Japanese media, it was eventually picked up by the mainstream Japanese media.

    So it's the Japanese media fault he didn't go to them first.

    And why didn't any Western media break the story before Facta(yes Japanese but not really media?!)?

    http://en.wikipedia.org/wiki/Michael_Woodford_%28executive%29

    In 2008 he became executive managing director of Olympus Europa Holding GmbH. Woodford had originally flown to Tokyo to submit his resignation after Olympus purchased Gyrus, a move that would have normally been under Woodford's direct authority but instead had been arranged directly by Tsuyoshi Kikukawa, the then-chairman, president, and CEO of Olympus. Kikukawa instead made Woodford head of all of Olympus's Europe operations and gave him a seat on the board of directors.

    He knew about this. He was paid off before(Woodford head of all of Olympus's Europe operations) and they stupidly thought he could be bought again.

  • -4

    randomman

    Its all very plain and simple, Woodford played his trump card, his knowledge about the vulnerable corrupt activities of the company made him a sht load of money. It has got nothing to do with the "white knight exposing the bad guys" wishful thinking of a lot of the opinions here. To be fair, imagine what would happen to any employee in any of the major US investment banks if they tried to "expose" the dirt that happens in their "exciting" environment.....

  • 7

    theeastisred

    So it's the Japanese media fault he didn't go to them first.

    It's the Japanese media's fault they did not pick up on the Facta story even though it would have been far easier for them to do that than for Woodford, who as you know does not speak or read Japanese. But, they didn't bother. Foreign media also much less able to pick up on a story in a relatively obscure Japanese magazine. But when the story was brought to their attention by one of the principals, they certainly recognised it as a story, and that is how we all know about it.

    The Gyrus deal was not one of the three that were totally crazy. He believed Olympus had overpaid, and he was not happy about being bypassed as you pointed out. But at least it was a real business, unlike the other ones that later came to light.

    It is true things turned out OK for Woodford financially in the end but that was very far from clear when he was basically thrown out of the country by Olympus without even being able to pack his personal belongings.

  • -4

    AKBfan

    He made far more from exposing them than he would have from statying. i don't believe the whole whiter than white stuff about him. He always comes across as a bit tacky to me.

  • 1

    Pathmasekara Kumara

    A real Modern Day Samurai!

  • -9

    Cos

    Are not his 15 minutes over ?

    for potential whistleblowers ... To be honest, if they are in a junior position in a Japanese company, then given the way that the law and society is, I would not advise them to do it.

    That's exactly what he did, He worked decades in the pond, swimming among the corrupted crocodiles and that's only when he reached the top of the top, that he saw the potential to grab the jackpot.

    I have given away a seven-figure sum to the charities

    Read : " I was given a eight-figure sum by Olympus. "

  • 6

    Tatsuru Matsunaga

    Great questions overall. Kudos to the interviewer!

  • 5

    GW

    And to be sure there are more than a few "Olympus's" still around but the media isn't doing their job sadly, which they have never done in this country!

  • -2

    blue_monday

    I wonder if he could have handled the situation better?

    His chummy chummy letter to "Tom" inquiring about the situation prior to the board room members ganging up on him seems willfully naive to me. If his objective was to resolve the situation he played his hand quite poorly. The entire company paid for the actions of a few.

  • 3

    Strangerland

    As it should have. That's how companies operate in Japan. Everyone does well or no one does well.

  • 12

    Knox Harrington

    While the interview is interesting, I think even more telling are some of the comments here. Many Japanese really think that way: "Ooh, what business does this gaijin have destroying a good 'ole, traditional, proud Japanese company!?" It is worrying to see (and know) that when people try to do the right thing in Japan, they get mocked and ridiculed by the ignorant, sheepish masses who'd rather cower than show some damn backbone. Woodford did the right thing. His fortune was probably that he was an outsider and could run away from it all. Imagine a Japanese person in his position... Not pretty. Which is probably why it never, ever happens.

  • 5

    marcelito

    oldsanno - as already pointed out by others above the Olympus cover up story with Woodfford provided information was not run by a Japanese "paper" first, as Woodfford himself had said a Japanese "magazine" Facta story was a pointer for him to investigate the issue further inside the company and then provide those facts to the Financial Times. You are wrong.

    and as for your "you have no interest in the truth if they don't fit your preconceived notions of superiority" comment -you are not carrying much of a chip on your shoulder there, are you?

  • -4

    Guratan

    His action was a righteous exposure much needed in Japanese society, but one thing he totally misunderstands is that the secrecy law that Abe passed is not intended for the cooperate information but for the information concerning national security. How would that be a "profoundly disturbing" law when there are countless such laws in any developed countries with possible foreign threats. The law Abe passed was something Japan needed for decades but just had to wait to happen till he showed up. I can only guess that Woodford is just another liberal who repels any sort of conservative actions by reflex, which is disappointing.

  • -5

    Zach Odle

    we don't need people like him causing trouble.

  • 7

    Strangerland

    we don't need people like him causing trouble.

    He didn't cause trouble, he exposed it, and we most definitely do need people like this, unless you think corruption is a good thing.

  • 0

    Nanraayashimunitarinai

    ChubbinessfanFeb, with all due respect to your opinion, if you never been inside Japanese society and Japanese business, never worked in Japanese kaishya, you won't be able to understand it in any case.. Sorry for the truth.

  • -2

    TokyoDiman

    The secrecy law is disturbing to say the least. Its a step back when it comes to a much needed internationalization of Japan. Most Japanese think that Japanese thinking is right and foreign ideology is just that gaijin...but they are slowly beginning to realize that Japan is in fact the gaijin in their approach to most things in business ideology and life. At leasr when it comes to the opinion of the rest of the world. Japan having no natural resources an aging population and economy desparetly needs the rest of the world.

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