Olympus board promises no more scandals

President of Olympus Corporation, Hiroyuki Sasa announces the companies medium-term vision for the next five years during a press conference in Tokyo on June 8, 2012. Scandal-hit Japanese camera and medical equipment maker Olympus said on June 8 it will cut about seven percent of its workforce -- and book a profit this year -- as it tries to recover from a loss cover-up scandal. AFP PHOTO/Toru YAMANAKA

TOKYO—The new board of Japan’s Olympus pledged Thursday there would be no more accounting scandals at the camera and medical equipment maker, as it defended a payout to its whistleblowing former chief.

President Hiroyuki Sasa, who was appointed earlier this year after the firm was rocked by a massive loss cover-up scandal, said Olympus was revamping its corporate governance and internal auditing measures.

“We will strengthen our governance, including internal auditing, and will establish a system to deal with a scandal if something happens by any remote chance,” Sasa told shareholders at the company’s annual meeting in Tokyo.

He said that the measures were being taken to ensure “that we will never have such scandals again.”

Olympus’s reputation, and Japan’s corporate governance image, were badly damaged after its British former chief executive blew the whistle last year over $1.7 billion worth of losses that the company had moved off its balance sheet.

The firm initially denied allegations it had used past acquisitions and outsized consultant fees to hide the huge losses dating back to the 1990s, but eventually admitted wrongdoing.

In March, the company and three former senior executives — including ex-president Tsuyoshi Kikukawa — were charged over their role in the scandal.

Olympus has since announced a major overhaul that includes cutting about seven percent of its workforce, while its new chief has publicly said he is seeking a capital injection to shore up the company’s finances.

On Thursday, some shareholders cast doubt on promises to clean up the firm, pointing to a separate scandal involving accounts that were allegedly falsified by the head of Olympus’s South Korean unit.

“I’m very, very worried about this issue of false statements that the executive of your South Korean unit made,” said a shareholder who identified himself as Masatora Takenouchi.

“Can you swear that past problems will never ever happen again?”

Board member Yasuo Takeuchi said Olympus had sacked the executive earlier this month and was continuing to probe the matter.

Another investor questioned whether a reported 10.0 million pound ($15.6 million) payout to former Olympus chief Michael Woodford — who blew the whistle on the cover-up scheme — was “hush money.”

Another board member Hideaki Fujizuka defended the move as prudent to settle an employment tribunal case launched by Woodford in England.

“We judged that reaching a settlement to concentrate on our business would be in the company’s interest, giving consideration to opinions from Japanese and British lawyers,” he said.

Olympus executives declined to comment on earlier reports that Sony would inject over $620 million into the firm, saying only that they were “negotiating with more than one company”.

The reports said Sony, which is struggling after posting a record loss in its latest fiscal year, may team up with Olympus on camera technology and its medical equipment business.

Best known as a camera maker, Olympus is also a leader in the health care field — including a near two-thirds share of the global endoscope market — which Sony has said it would expand as part of its own corporate overhaul.

Olympus has been searching for a potential investor as its balance sheet deteriorated since the accounting scandal, reporting a net loss of 48.99 billion yen in the fiscal year to March.

The firm’s shares closed 0.24 percent higher in Tokyo trade on Thursday at 1,247 yen.