TOKYO/LONDON (Reuters) - Japan’s scandal-hit Olympus Corp (7733.T) has promoted Akihiro Nambu to its top financial role just months after some of the firm’s largest shareholders called for him to resign over a $1.7 billion accounting fraud.
Nambu, who headed the investor relations division at the endoscope and camera maker, has taken over as the firm’s most senior financial officer responsible for compiling financial statements, Olympus said in a statement late last week, a key role in improving the company’s corporate governance. Nambu was also a director at a British medical equipment firm Gyrus, which was acquired by Olympus in 2008 for $2 billion, and for which the company paid a hefty $687 million advisory fee as a part of complex web of transactions aimed at concealing massive losses.
The English translation of a report published by a third-party committee commissioned to probe the firm recommended that “Olympus should remove the seat of disease centered on the old management and literally renew itself in heart and mind” to win back the trust of investors and customers caught up in its woes.
“Elevating someone who was intimately involved in the Gyrus transaction to a senior role in finance is so completely at odds with the third-party committee’s recommendations that I find it hard to believe,” Ethan Devine, portfolio manager at New York-based Indus Capital, which holds just under 5 percent of Olympus told Reuters.
The report also said that disclosure of information at the company was broadly insufficient around the time of the Gyrus deal and that “electing presidents’ friends or people with connection from business partners as outside directors or outside auditors should be discontinued, and those who are fully suitable as outside executives should be elected.”
A second U.S. investor, Southeastern Asset management, which holds a 3.95 percent stake, had demanded in November that Nambu should step down immediately along with then-chairman Tsuyoshi Kikukawa.
Southeastern declined to comment on news of the appointment. Asahi newspaper reported on Monday that Nambu signed off on a Gyrus financial statement that falsely reported the net worth of the firm at 69.6 billion yen ($845.7 million) for the year ended in March 2009, when it was actually 37.5 billion yen. The statement was later submitted it to the UK authorities, Asahi said.
“It is true that an employee that became the head of our finance division as of April 1 was a non-executive director of UK’s Gyrus after we purchased the firm,” said Osamu Kobayashi, a spokesman at Olympus.
“We will refrain from commenting on whether he was involved in the scandal, as it may be related to investigations going on in Britain,” he said.
He added that Gyrus had revised its net worth in its 2008/09 financial statement but declined to comment on whether Nambu had signed the original document. While prosecutors in February charged the firm and six key figures including Kikukawa over the scandal, the firm has withstood one of Japan’s worst corporate scandals partly because of its profitable endoscope business.
But its balance sheet has been weakened by the fraud, used to hide investment losses from its investors for 13 years before it was uncovered in October. To shore up its finances, the 92-year-old firm has been considering alliance offers, but the current president, who is set to step down later this month, has said that any tie-up decisions must wait until a new team is chosen.
Olympus in February has nominated an insider, executive officer Hiroyuki Sasa to become the next president, sparking criticisms from foreign investors including Southeastern.
Sasa is subject to approval at an April 20 extraordinary shareholders’ meeting, as well as the firm’s new board, which has yet to be fully overhauled despite being discredited by an outside investigation.
Reporting by Taiga Uranaka and Yoko Kubota in Tokyo and Sinead Cruise in London;; Editing by Greg Mahlich