CG OLYMPUS CASE STUDY:
Question 1: Why did Kikukawa hire Woodford when there was pervasive fraud? What
constraints do you think Woodford could have anticipated before he took on this job?
a. Reason Woodford was hired:
First of all, when Olympus was the most indebted corporation in Japan, Tsuyoshi Kikukawa
made Woodford as president because of his ability (headed the medical business in Europe and
understood the medical business, which was key to Olympus’ profitability). The company needs
an executive who could deliver results, increase the profitability and with that improve in
results, make the wrongdoing slip away into history.
As the chairman of the BOD and the former President of Olympus, Kikukawa knew what was
going on throughout and the new presidents always accepted the decisions made by their
predecessors. With the belief that the financial statement at that time seemed reasonable
(cooked by financial executives), Woodford would not able to know the truth as well as have
time to discover.
Moreover, Kikukawa and his employees didn’t fully trust the foreigner when working because of
their corporate culture characteristics, therefore Kikukawa knew that the fraud of the company
wouldn’t be disclosed.