Olympus scandal highlights board inadequacies in Japan
* Olympus case takes shine off recent steps to improve
governanceBy Nathan LayneTOKYO, Oct 18 (Reuters) - The scandal at Olympus Corp
triggered by accusations of improper payments has put a
spotlight on what critics say is a key weakness of
Japanese-style management: the lack of strong independent
oversight on most boards.Japanese boards are typically stacked with insiders, and
Olympus, a camera and medical equipment maker whose chief
executive was abruptly dismissed last week, is no exception.Twelve of Olympus’ 15 board members are company executives,
and one of its three outside directors failed to pass
a test of independence set by top proxy voting firms.This structure, while common among Japanese companies,
appears to have left the Olympus board vulnerable to groupthink
when dissension and rigorous debate were needed most.”You have so many insiders, very few independent members and
none of them is really in a position to challenge the
decision-making of long-standing members of the board,” said
Robert McCormick, chief policy officer at proxy advisory firm
Glass Lewis & Co. “I think the CEO kind of came into that.”Olympus did not immediately respond to a request for comment
for this article.Former Olympus CEO Michael Woodford has told media he
believes he was sacked for questioning about $680 million in
payments to financial advisers in the purchase of Britain’s
medical equipment firm Gyrus in 2008, or one-third of the
transaction price, and $600 million in goodwill impairment after
other small acquisitions in Japan.Olympus says that Woodford was dismissed because of a clash
of management styles and that it has carried out proper
accounting and disclosure for the acquisitions.SHARES PLUNGEBut the relentless slide in the share price — it has lost
43 percent in the past three sessions — suggests investors are
not satisfied with the company’s explanation and generally lack
confidence in management.Chairman Tsuyoshi Kikukawa, who replaced Woodford as CEO,
told the Nikkei newspaper on Tuesday that the Gyrus-related
payment was closer to 30 billion yen ($391 million) and said
losses at the domestic companies it acquired represented lapses
in judgment on his part.But to some critics Kikukawa’s comments may only reinforce
the notion that there have been few checks on his authority and
may not silence criticism of the payments, which at 30 billion
yen were still unusually high for an acquisition of that size.The lack of independent directors supervising management is
one of the key factors behind Japan’s No. 36 ranking out of 39
countries on corporate governance in the latest survey by
research firm GMI .Other propagators of poor governance include
cross-shareholdings with business partners and a tendency for
executives to hang on wielding influence in advisory posts even
after they’ve retired from the board.The Olympus case may give the impression that governance is
moving backwards, despite a series of steps aimed at improving
the situation in recent years, including the Tokyo Stock
Exchange’s requirement from this year that all companies have at
least one independent director or auditor.”This is a negative step for corporate governance in Japan,”
said Jamie Allen, secretary general of the Asian Corporate
Governance Association based in Hong Kong.”There had been some hope that Japanese companies would take
on not just outside directors but outside managers and that
corporate cultures in Japan would be more open and
international.”
New China Life eyes approvals for $4 billion IPO next week: IFR
New China Life’s draft prospectus for the Shanghai listing may be released as early as Friday and the China Securities Regulatory Commission (CSRC) may review its IPO application next week, the 21st Century Business Herald reported on Tuesday, citing an unidentified regulatory source.However, IFR said that whether the Shanghai listing hearings would happen next week depended on whether the CSRC would want the issuance to come amid difficult market conditions, further pressuring the broader market.The regulator halted approvals for new listings during the global financial crisis in 2008, concerned that a heavy supply of new shares would further undercut already weak share prices.New China Life had lined up a number of cornerstone investors for the deal and was planning to start premarketing the deal once regulatory approvals were granted, IFR reported earlier this month.
Fans queue for Steve Jobs’ last iPhone
Queues wound down the street in Sydney, Tokyo, London, Paris and Munich as fans gathered to get their hands on the iPhone 4S, ahead of later store sales in North America.”I am a fan, a big fan. I want something to remember Steve Jobs by,” said Haruko Shiraishi, waiting patiently with her Yorkshire terrier Miu Miu at the end of an eight block queue in Tokyo’s smart Ginza shopping district.The new model looks similar to the previous iPhone 4 but has an upgraded camera, faster processor and highly regarded voice-activated software, which allows users to ask questions.”It’s like your own personal secretary,” said Shane Gray, 42, in Sydney.The phone — introduced just a day before Jobs died — was initially dubbed a disappointment because it fell short of being a revolution in design, but glowing reviews centred around its “Siri” voice-activated software have helped it set a record pace in initial, online sales orders.Apple CEO Tim Cook and his executive team hope the first device sold without their visionary leader at the helm will protect them against a growing challenge from the likes of Samsung Electronics (005930.KS).The South Korean firm, Apple’s arch-rival with smartphones powered by Google’s (GOOG.O) Android software, expects to overtake it as the world’s biggest smartphone vendor in terms of units sold in the third quarter.”(Jobs) made everything better and the products he released were thought through in such detail,” Duncan Hoare in London said, after a loud roar greeted the opening of the store.”It was about the beauty of something and the simplicity.”Apple does not release sales figures on launch day, so gauging initial sales is difficult. However it took more than 1 million online orders in the first 24 hours after its release, exceeding the 600,000 for the iPhone 4, though that model was sold in fewer countries initially.”Despite the initial disappointment that this wasn’t an iPhone 5, the reality is we’re still seeing the usual frenzy that we’ve got used to on launch day,” analyst Ben Wood at CCS Insight told Reuters, adding that analysts expect a few million phones to be sold globally on the first weekend.Unlike many in Tokyo, shoppers in European cities told Reuters they wanted the phone because it was a ‘lifestyle choice’ and not necessarily a tribute to Jobs.”I need a new one since my dog destroyed my old 3GS,” said Gaby Wunder-Sambale, 45, shivering in Frankfurt.Despite the enthusiasm at Apple stores, the launch was marred somewhat by widespread complaints this week on the Internet about problems downloading iOS 5 — the latest version of Apple’s mobile software.There were also problems with iCloud, Apple’s online communications, media storage and backup service formally launched on Wednesday, with users reporting glitches such as losing their email access.Queues in Paris were smaller than those normally seen at an iPhone launch, with some fans there wondering if the somewhat underwhelming launch had put people off, but in London and elsewhere the queues were as large as ever.On Regent Street in central London, the queue wound down a sidestreet and into a park, where Starbucks had a mobile stand to serve coffee. Of the 40 people to whom Reuters spoke in London, 13 were switching from other phones.”This is rubbish,” one buyer at a north London store said, holding his Blackberry after owner Research in Motion (RIM.TO) (RIMM.O) struggled for days to fix an international outage of its Blackberry email and messaging services.JOBS SHADOW OVER iPHONE LAUNCHThe vast majority of the iPhone 4S buyers Reuters spoke to in Sydney, France and Frankfurt were existing Apple customers, many having bought the original iPhone and subsequent upgrades.”Since Jobs died, I wanted to make sure I had a new iPhone with some advantages over the old,” said iPhone devotee Mark Du, concerned about future gadgets without Jobs in charge.Apple fans in Sydney, Tokyo, Frankfurt and London made sure Jobs was part of the iPhone 4S launch, with flower, candle and photo shrines to the late Apple boss erected outside the stores. A black and white picture of Jobs in Covent Garden carried the line “Let’s make a dent in the universe”.Underscoring the enthusiasm for the new phone, Japanese mobile carrier Softbank Corp (9984.T) had to temporarily stop contract applications after its computer system was overwhelmed with more requests than it had expected.Some analysts expect fourth-quarter iPhone shipments to reach 30 million or more, almost twice as many as a year ago.Apple’s fifth-generation iPhone uses chips from Qualcomm Inc (QCOM.O), Toshiba (6502.T) and a host of smaller semiconductor companies, according to repair firm iFixit, which cracked the device open on Thursday.The iPhone — seen as the gold standard for smartphones — is Apple’s highest-margin product and accounts for 40 percent of its annual revenue.Analysts point to several factors in Apple’s favor: a $199 price that matches up well with rival devices; availability promised on more than 100 carriers by the end of 2011, far more than its predecessors; and glowing reviews.
