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Exposure manual

30 November 2012 By Quentin Webb

Society and markets need whistle-blowers. But it’s hard, lonely work. Michael Woodford’s “Exposure” details first-hand how the maverick executive blew the whistle on a $1.7 billion accounting scandal at Olympus, the company he ran. His integrity makes him a welcome outlier in an age of financial scandal.

Soon after becoming president of the Japanese electronics group in April 2011, Woodford was alerted to a series of odd, costly acquisitions. These included obscure companies active in face-cream and microwave dishes, neither core areas for a distinguished maker of endoscopes and cameras. He pressed repeatedly for explanations, was briefly elevated to chief executive, and then sensationally fired in October 2011. By the time the full magnitude of the scheme and its purpose – to hide earlier investment losses – was understood, it was clear this ranked among Japan’s worst corporate scandals.

Woodford is unusual in several ways. An entrepreneurial sort who left school at 16, he’s not a typical polished corporate chieftain. Nor does he speak Japanese, and was in fact the first foreigner ever promoted from within to serve as president of a Japanese corporation.

He also makes an unlikely whistle-blower. For a start, they do not typically occupy the top job – although Woodford did quickly find his power as president was curtailed. And while he’s not clubbable, he’s not prickly either. Quite the opposite: the book overflows with emotional tributes to family, friends, gurus, assistants, and former colleagues. That wide social network was clearly a big help in what Woodford shows was an otherwise unsettling, exhausting, and isolating battle.

Drive clearly played a big role too, as did a strong moral sense. Woodford refers several times to Animal Farm, which he loves for warning about the dangers of power. He also had previous, having tackled earlier problems in Olympus’s German unit credibly. And although a salesman by background, this taught him no Glengarry Glen Ross-style lessons in shyster-dom. For him, sales is simple hard work where you must be “pleasant, natural, honest and listen”.

The media was also a huge help, starting with Facta, a small, muck-raking magazine that first broke the story. He came to see, correctly, that the media could be a powerful weapon, and gave more than 200 television interviews alone. Later on, a handful of forthright foreign investors came to his aid, most notably U.S. value investors Harris Associates and Southeastern Asset Management, which both also turned up the heat on the Olympus board.

Others, of course, emerge from this account with far less credit. That does not just include immediate culprits such as former Olympus chairman Tsuyoshi Kikukawa, who pleaded guilty to charges related to the case in September. Japanese institutions fare badly in a broader sense – including investors who held their tongues, Olympus’s supine board, and the quiescent mainstream media.

The story is better than the book. Woodford told Reuters recently he fell out with his ghost-writer. That shows. Doubtless a film-maker who loves the sheen of corporate life could craft a gripping screen version. But on the page, Woodford’s attention to C-suite banalities, like Nespresso, egg croissants, and hotel upgrades, can be inadvertently hilarious. One chapter starts aboard a cramped 747 thus: “With the toilet at last having fallen silent…” – surely not a line John Grisham need crib anytime soon.

It’s also incomplete. The story is not yet over, and some questions may never be answered. For example, how much did outside fraud-enablers cream off? Nonetheless, Woodford’s is a tale worth telling.


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