Feature Article

August 27, 2012

Olympus to Sell Telecom Branch for $637 Million in Restructuring Effort

Olympus has been hiding investment losses since the 1990s and this information, as well as other corporate governance improprieties, came to light when the company fired former CEO Michael Woodford. Selling part of ITX Corp , the telecom branch of the company will get rid of one of the businesses not related to the core operation of the company.

The company specializes in cameras and health and scientific related imaging technology. It operates medical, life and industry, video, provision of biomaterials and system development segments with 198 subsidiaries and 10 associated companies as of 2012. It is in talks with Sony Corp, Fujifilm holdings and other potential investors to form a possible partnership while the company is going through a restructuring phase.

ITX was purchased in a multi-transaction deal from 2000 to 2011 for an estimated 60 billion yen or a little over $765 million at the current exchange rate of 78.38 yen per one U.S. dollar. The sale will be completed in late September of 2012 and the company hasn’t disclosed if it has made any profit on the $637 million price it is receiving for only one part of ITX.

The firing of Woodford by Olympus has exposed many of the flaws in the Japanese corporate culture. When he raised question about advisory fees the company made to recent deals he confirmed GMI’s low rating of Japan’s corporate governance. They ranked 33 out 38 countries, putting them behind governance violators such as China and Russia and lower than emerging markets like Brazil.

Japanese corporations have very little if any independent oversight. This type of governance makes senior members of the company less accountable which inevitably results in financial irregularities at a higher frequency than other countries. In Japan only three percent of the largest publicly traded companies have an independent majority board, compared to 92 percent for the United States.

When news of the scandal and accounting fraud was made public, price for shares of the company fell by 80 percent since October of 2011. The restructuring of the company has resulted in recovering 40 percent of that loss and the company seems to be heading in the right direction at the moment.

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Edited by Rachel Ramsey


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