The new president of embattled Olympus Corp. on Thursday denied the company's $687 million payment for financial advice was excessive, while foreign business groups urged Japan to bolster its lagging corporate governance rules to avoid more high-level scandals.
Shuichi Takayama, who was named president Wednesday following the abrupt resignation of Chairman and President Tsuyoshi Kikukawa, sought to placate frustrated shareholders with his second press conference in less than a day.
Takayama stuck to the camera and medical equipment maker's denials of wrongdoing over its $687 million payment to an obscure Wall Street financial adviser as part of a $2 billion purchase of U.K.-based Gyrus Group Plc. The payment represented more than a third of the acquisition price. Fees for advisers are normally 1 to 2 percent of the deal value.
Takayama also maintained the company had done nothing wrong in other past acquisitions that were massively written down in value.
Kyodo news agency, meanwhile, reported that Japan's Securities and Exchange Surveillance Commission has launched an inquiry into the company's acquisitions. The regulator wouldn't confirm the report.
Former Olympus CEO Michael Woodford, whose revelations triggered the scandal and his sacking by the Olympus board two weeks ago, has turned over documents to the U.K. Serious Fraud Office, and media reports say the FBI is also investigating.
A board member at the American Chamber of Commerce in Japan said that if Tokyo had stronger corporate governance laws, the "fiasco" at Olympus would not be as serious as it has become.
Woodford, a British national, has said he was dismissed because he questioned the $687 million fee as well as the lofty prices Olympus paid for three small money-losing Japanese companies with seemingly little strategic value.
Between 2006 and 2008, it paid a total of 73.4 billion yen ($967 million) for recycling company Altis Co., food container maker News Chef Co. and cosmetics firm Humalabo Co. All three are based in the same building in Tokyo.
Olympus wrote down more than three-quarters of their value in fiscal year ended March 2009. It said Thursday that the deals were unrelated to the Gyrus acquisition.
"There were things I could not talk about yesterday," Takayama said. "I thought about it and decided that we should release information."
"Those decisions were made in line with our mid- to long-term strategy," he said of the acquisitions.
Olympus confirmed for the first time the identities of the Gyrus deal financial advisers as Axes America LLC of New York and Axam Investments Ltd., both founded by U.S. resident Hajime Sagawa. It decided to work with Sagawa because of his financial experience and connections.
Takayama denied the fee was excessive. Executive Vice President Hisashi Mori said there was no prior personal relationship between Sagawa and Olympus executives, but he declined to disclose who made the initial introduction.
He blamed Woodford for disclosing secret internal information, which led to the recent plunge in Olympus shares.
The company says Woodford was dismissed because of his unilateral decision-making and intimidating managerial style. The Briton also spent much of his time outside of Japan, Takayama said.
He acknowledged that the board of directors did not discuss Woodford's allegations when they voted to fire him.
Investors appeared encouraged by Takayama's statements, at least for now. The issue surged more than 23 percent in trading Thursday on the Tokyo Stock Exchange, recovering some ground after losing more than half its value in the days after Woodford's firing.
Olympus is setting up its own independent task force to look into the deals "as soon as possible." Takayama did not specify a timeframe. The company pledged to be more forthcoming with information in the future.
Four chambers of commerce representing businesses from the U.S., Europe, Canada, Australia and New Zealand on Thursday urged the Japanese government to bolster corporate governance as it seeks to revise its Company Law.
Japanese listed companies significantly lag those in other leading economies in the use of independent outside directors and tend to appoint only board members with close ties to the company's management or majority shareholder, they said in a press release.
That has undermined the confidence of foreign investors and perpetuated the perception that Japanese corporations are "insider-dominated" and out-of-step with global governance standards, the statement said.
Japan should amend its laws to include a specific definition of "independent outside director," require listed companies to appoint a meaningful number of such directors, and require an independent committee to handle board decisions where the risks of self-interest and conflicts are inherently high.
The initiative was not prompted by problems at Olympus, but rather by the "frustration and concern" with the perceived slow progress in amending the law, said James Lawden of the European Business Council in Japan, at a press conference at the Foreign Correspondents' Club of Japan.
Nicholas Benes, a governor at the American Chamber of Commerce in Japan, said that if Tokyo adopted the proposed changes in the law, "the fiasco over at Olympus that's now occurring would not be occurring the same way, and as badly."
More broadly, failing to improve Japanese corporate governance will hurt Japan's economy as a whole, he argued.
Associated Press writer Malcolm Foster contributed.