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…we’ll call you

6 December 2011 By Wayne Arnold

Michael Woodford may not be the right fit to run a post-scandal Olympus. Two months after he was fired for blowing the whistle on an accounting scandal, the former chief executive wants to return to the helm. Woodford knows the Japanese group well, but his short, divisive tenure as CEO makes him an awkward choice. Though Woodford should make any shortlist, Olympus shareholders would be wise to consider other candidates.

Woodford is rounding up a posse of investors and bankers to oust Olympus’s board and put him back in charge. He’s promising to shed jobs and side-show units like face cream in an effort to boost earnings at Olympus, which has 70 percent of the global market for scopes that peek into people’s insides. The trick will be mustering shareholders who’ve owned at least 3 percent of the stock for at least six months and can force an extraordinary general meeting. Some of the biggest and most vocal – like Southeastern Asset Management – can’t do that because much of their stake is held on behalf of clients.

It’s clear the present board should go – it failed to spot the scam and then dumped the only director brave enough to cry foul once it emerged. There’s no question Woodford knows his way around: 30 years at Olympus have given him rare insight into its business, products and competitors. And in the three years he ran the European business, he boosted margins to 9.7 percent from 7.4 percent.

However, Woodford’s spell at the helm lasted just six months. The company reported a 2.15 billion yen loss in the first quarter of his tenure. Though he boosted earnings in the company’s North American unit by slashing jobs, it’s not clear he would have the stomach to do the same in Japan, where layoffs are still seen as betrayal. Re-hiring Woodford might also make him too powerful: it would be virtually impossible for a board to expel him again.

As an Olympus lifer, Woodford may lack the outsiders’ perspective needed to overhaul the company. And doubts will continue to swirl about why the old board was so confident he would never uncover their secret. Though Woodford may turn out to be the best person to lead Olympus, shareholders should compare him with other candidates first.


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