The former Olympus Corp. CEO who blew the whistle on dubious spending at the Japanese camera and medical equipment maker said Friday he is giving up his fight to regain the presidency and plans to sue the company.
Michael Woodford said he decided to drop his bid when he realized he didn't have the support of Japanese institutional investors, whom he blamed for tacitly allowing the current board to stay on despite acknowledging a massive cover-up.
"Despite one of the biggest scandals in history, Japanese institutional investors have not spoken one single word of criticism, in complete and utter contrast to overseas shareholders who are demanding accountability from directors," Woodford told a news conference at the Japan National Press Club in Tokyo.
"Even if I win, do I want to come back" to such a situation, the 51-year-old Briton asked.
Woodford also said he planned to sue for wrongful dismissal. "I will most definitely be suing Olympus," he said.
He said Japan lags far behind other advanced economies in the area of corporate governance largely because a system of cross-shareholdings at many companies in which corporations to hold stakes in each other to ensure stability.
"Cross shareholding keeps everything comfortable, cozy, nice _ no confrontation, no challenge, no takeover," he said. Japan "will go into terminal decline" if this system persists, he said, urging Japanese legislators to pass laws that "stops this incestuous club."
In October, Woodford confronted Olympus management about the excessive spending on questionable acquisitions and fees paid to an obscure Wall Street firm, which later proved to be part of the cover-up. He was quickly fired as president.
An independent panel found that the deception at Olympus dated to the 1990s, and involved an elaborate scheme to hide 117.7 billion yen ($1.5 billion) in investment losses. The company had initially denied any wrongdoing.
After that, Woodford mounted a campaign for a comeback at Olympus, saying the company needed a new board of directors, mostly outsiders, to make a fresh start, ensure transparency and leave the scandal behind.
The fight between Woodford and Olympus management would have come to a head at the next shareholders meeting, the date of which had not been set.
In an interview with The Associated Press last month, Woodford sounded upbeat about gaining support for his comeback, with support from non-Japanese investors as well as the Japanese public.
But in recent weeks, Woodford said he realized he could not overcome the resistance of institutional investors, such as Olympus' main creditor bank Sumitomo Mitsui Banking Corp. He said he requested a meeting with the head of the bank, but was turned down.
Even if he had won the proxy fight, there would have been a "fracture" between the overseas shareholders and the Japanese institutional shareholders, Woodford said.
He said the scandal comes across to the rest of the world as "an Alice in Wonderland, bizarre situation. I get fired and lose my job for doing the right thing. And (the directors) are still there."
Sumitomo Mitsui and Olympus had no immediate comment.
The company remains under a criminal investigation. Last month, Japanese prosecutors raided Olympus headquarters and the home of former President Tsuyoshi Kikukawa, who is suspected of helping to orchestrate the cover-up.
Woodford said in a statement released Friday that another reason for his decision was the emotional pain suffered by his wife, who wakes up screaming at night.
He said his firing and the hammering he has taken were "traumatizing for all those around me."
Woodford, a 30-year employee at Olympus, said some good had come of his effort by drawing attention to what he called a corporate culture that encouraged "yes-men."
Japanese government officials have defended the country's corporate governance record, with Industry Minister Yukio Edano saying that it was on par or even better than that of the U.S. Edano didn't elaborate, but notable accounting scandals in the U.S. include those at Enron and WorldCom.
Woodford said his fight had not been about an outsider fighting Japanese, but about someone who wanted reform versus those who had resisted it. Woodford said he liked Japan, and will visit often.
"The last 12 weeks have showed me the opposite of what I've seen in the boardroom. I've seen great kindness, support and empathy, the very best of Japan," he said.
Woodford was alternately pessimistic and cautiously optimistic about Japan's future.
"Japan has such ingenuity and human talent. If you look at Olympus, Japanese engineers who designed world-beating medical technology," he said. "But at the senior level, the checks and balances don't exist in the same way."
He said he was hopeful that the scandal at Olympus may have stimluted debate in Japan: "It's only in retrospect, in maybe a year or three years, we look back. Did the Olympus scandal change things?"
Associated Press writer Yuri Kageyama contributed to this report.