The Olympus Scandal

8089 Words Apr 18th, 2013 33 Pages
The Olympus Scandal

Hot Potatoes and Flying Funds



Summary

This paper describes the case of Olympus, a Japanese manufacturer of optic equipment, at which in early 2012 a scandal was uncovered which was soon dubbed to be one of the largest loss-concealment schemes of Japan. In the 1990’s, Olympus incurred significant losses on financial investments made. These were subsequently hidden with the aid of investment companies by shifting the investments around. In the 2000’s, these losses were to be repaid by paying exorbitant merger and acquisition fees to these investment companies. After newly-appointed CEO Michael Woodford blew the whistle on these frauds, the company got into trouble. Our research into the events leading to this
…show more content…
Olympus is already market leader in the first category, creating unique, high-resolution equipment. For the second category Olympus is still broadening its market share. An important step in this process was the acquisition of Gyrus, plc in 2005. Later on we will see that the acquisition of this U.S. endoscope company has played a very important role in the fraudulent activities of Olympus.



In 2011, Olympus had about 34,391 employees. This number had been decreasing for a while, since in 2009 they had 36,503 employees. But not only the number of employees has decreased in the last few years. Net sales declined in 2011 to ¥847,105 million (about $10,589 million). Operating income declined to ¥35,360 million, about $442 million (Olympus Corporation, 2011a). The development of the results of Olympus in the past few years are shown in these three graphs below:

[pic]

Figure 1: Olympus Financial Results (Source: Olympus Annual Report 2011)


Management Structure

In the Annual Report of 2011, it is stated that Olympus values an appropriate corporate governance structure from a global perspective. They adopted a corporate structure with an auditor system based in the Japanese Corporation Law. The corporate governance systems consists of a Board of Directors of 15 members, which audits and supervises the performance of directors, and a Board of Auditors consisting of 4 members, which are independent from the Board of Directors and…

More about The Olympus Scandal