EXPOSURE: Inside the Olympus Scandal, by Michael Woodford. Portfolio, 2012, 272 pp., $27.95 (hardcover)

Michael Woodford had it all: a multimillion-dollar salary, luxury apartment, chauffeur-driven cars and other perks as president of Olympus Corp. Why then did the Englishman decide to throw away his successful 30-year career at the Japanese corporate icon to blow the whistle on his fellow directors?

“Exposure: Inside the Olympus Scandal” is Woodford’s own version of events surrounding his decision to investigate allegations made by an obscure Japanese publication of massive fraud at the health care and electronics giant. Following the release of a Japanese version, this English-language memoir of one of Japan’s biggest business scandals is for more than corporate governance experts, with its fascinating tale of good versus evil.

Amid all the publicity surrounding the $1.7 billion tobashi scam involving overseas acquisitions, the book provides insights into Woodford’s motivations in exposing wrongdoing when the easier option would have been to keep quiet.

He was even forced to challenge his mentor, then chief executive Tsuyoshi Kikukawa, who had appointed him president and aided his rise from salesman at a British affiliate to global boss of the 93-year-old company.

After axing Woodford for his betrayal, Kikukawa accused his former protégé of not understanding “Japanese-style management” and acting “arbitrarily and peremptorily.” For Woodford, though, it was a “black and white” moral issue in which he was acting to defend the reputation of a company he esteemed for its product design and engineering.

Much has been written about Woodford’s status as an outsider, unfamiliar with the Japanese language and culture, with his Olympus career having been spent largely in Europe. However, far from being a simplistic battle between Western and Japanese standards, the book demonstrates that it was a Japanese employee who first leaked the scandal and Japanese journalists who exposed it.

In a lesson for others, Olympus’ strategy of stonewalling queries over its coverup nearly resulted in its failure, with its market value plunging $7 billion and the 40,000-employee company coming close to being delisted.

Unlike his former board colleagues, Woodford proved adept at handling the financial media and foreign shareholders, who ultimately forced an independent investigation and the rare ousting of an entire board.

Woodford aims a few barbs at Kikukawa and his handpicked former directors. Fortunately, he does not become subsumed with vengeance in a work which maintains a lively pace and largely avoids jargon, despite its financial complexity.

Disappointingly, there are few insights into Woodford’s career or the company, with the recently departed boss guarding the secrets of his success and those of his long-standing employer.

Woodford is also careful to differentiate between senior management and regular Olympus employees, from whom he claims to have received much support. Despite the actions of foreign shareholders, the silence of Japanese institutional shareholders spoke loudest and he was forced to abandon his push to return to his post, eventually settling an unfair dismissal claim in Britain for a reported £10 million (¥1.4 billion).

Woodford is scathing when he writes about Japan’s system of cross-shareholdings for shielding companies from the threat of takeover and protecting “mediocre” boards, all at the cost of the nation’s economic performance.

While the level of cross-shareholdings hit a record low in March 2011 of 11.1 percent of outstanding shares, Woodford said the system made corporate Japan “seem like a large and perverted golf club in which the overwhelming priority is to protect the club’s members.”

The concern for reformers is that the Olympus case will be used as evidence against appointing more outsiders to Japanese companies, which in the current age of globalization and increasing overseas investment could benefit greatly from different perspectives.

Despite initial fears, Olympus has proven not to be “the tip of the iceberg” for Japanese financial fraud. Ignoring calls for more reform, however, the Japanese government last year quietly shelved plans for even a single compulsory outside director at companies, even after moves by Hitachi, Hoya and others to install a majority of independent directors.

Olympus has since been sued by both foreign and domestic shareholders, with Kikukawa facing a potential 10-year jail term and other executives charged. The formerly proud company was also forced into a capital tieup with rival Sony.

“Olympus’ greatest mistake was believing it could manage the scandal according to the Alice in Wonderland rules in Japan, where you can bow deeply, say sorry, and the problem goes away,” Woodford contends.

By not walking away, Woodford proved that whistle-blowers can make a difference in Japan, even if most of this story’s heroes are Japanese.

Anthony Fensom is a freelance writer and communications consultant.

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