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Tatsuo Kainaka, the head of the panel investigating Olympus Corp., is surrounded by reporters after a news conference in Tokyo on Dec. 6, 2011. An independent panel issued a damning report into the $1.7-billion accounting scandal at Japan's Olympus Corp, urging legal action against executives behind the cover-up and the replacement of others who knew about it.


From the FT's Lex blog

At 3 p.m. on Wednesday, the management of Olympus presents its formal response to the findings of the independent committee established to investigate fraudulent or inappropriate conduct.

For the good of the company, and for corporate Japan as a whole, president Shuichi Takayama should take the opportunity to resign, and take the other 11 board members with him.

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Whether or not the committee is right on the precise flow of funds over the past two and half decades, its basic judgment that the company was "rotten at the core" seems hard to dispute. At a board meeting on October 14, it took directors 15 minutes to process what the committee calls (with magnificent understatement) this "problematic case," and to approve the firing of Michael Woodford in a unanimous vote.

In the days that followed, while Mr Woodford was telling a very different story, they allowed the company to maintain the line that the British-born chief executive had been dismissed for his abrasive management style and poor record of attendance. They also allowed the disclosure of a statement describing hundreds of millions of dollars of advisory fees as "not unreasonably high." Two presentations, meanwhile, attempted to justify spending ¥73-billion ($957-million) on a trio of start-ups with a combined ¥1.4-billion in capital. Only after three weeks did Olympus set up the investigation committee, at which point an alternative version of events began to dribble out.

Some board members have more questions to answer than others. The committee claims that Makoto Nakatsuka, for example, was an assistant to executive vice-president Hideo Yamada and corporate auditor Hisashi Mori (both of whom stood down early last month) in managing speculative investments from 1988 onwards. But the committee is charging Olympus with a contamination of corporate culture that only a new board can cleanse. It is wholly inappropriate, therefore, that Mr. Takayama and co preside over the process of renewal. The president should call an extraordinary general meeting of shareholders to accept the board's resignation, and let the reforms begin.

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