What Olympus Reveals: Deja Vu All Over Again

Unfortunately, Olympus is just the latest in a long stream of incidents that show that it is high time Japan made major changes to its corporate governance regime.

Could any set of transactions possibly smell worse and look more bizarre? I am investment banker who has sat on four Japanese boards including Livedoor's after the scandal (that was quite an experience..), all in vary stages of crisis or distress, but I could not write a novel this strange in ten years of trying. Truth isdefinitely stranger than fiction – even if we find out in the end, it was all just simple incompetence. And if it was, it's almost like we have even more to worry about Japan's corporate governance at many companies.

Where, pray tell,hasthe FSA been? Where were/are the statutory auditors (kansayaku) of this company, who have independent investigative powers? (Each individual one of them can do what he likes. Not a peepfrom them about what they did, or are now doing? This strongly implies they are allcomplicit by way of past involvement, despite the decades-old claim thatkansayaku are independent enough ). Why was the TSE days late in reacting meaningfully? Wherewas the Japanese press?(This one makes you think all the more, the Y must be part of this mess.) And I know from personal experience, that Japanese companies tell the Japanese press to just keep certain things quiet, and the Japanese press obediently does so until (if so) the matter hits the pages of the FT of the Wall Street Journal.

As they did withTepco and Kyushu Electric, is the press and the MOJ Subcommittee on Company Law Amendment once again just going to ignore the systemic corporate governanceproblems exposed bythese events …act like they never happened?

Pretty much the entire rest of the world is now going through deep re-think or at least meaningful improvementeffortswith regardcorporate governance, but in Japan the amazing thing is that even after: a) the largest failure of board oversight over risk management in history (Fukushima); b) political fraud by Kyushu Electric -, having employees pretending to be farmers so as dupe other farmers and build nuclear reactors – ; and then simply censoring part of its own investigative committee's conclusions; c) Olympus' utter mess, need we say more;and d) now Daio Paper, where the son of the founding family diverted 10 Bln to personal uses, …after all this occurring in only seven months, no one in the media or the elite is having a serious discussion or making serious proposals about corporate governance, …at time when the national Company Lawhas beenin the process ofbeing amended!Clearspeak: meaningful reform of corporate governanceisstill a taboo topic, with many experts afraid to give their true opinions, or even have them, lest they be effectively shunned. And for a variety of reasons, Japanese people do not feel that the Company Law is their law so much as something that came down from on high (okami; the bureaucrats) and is not theirs to judge or comment on.

In a modern society where Trillions of Yen of damage was just externalized by Tepco and will be paid by all of us taxpayers and our children, this isextremely disturbing. Why can people not see that our governance system in Japan is not working better than elsewhere, and needs more than the minor tweaks the MOJ is now preparing for it?

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.