ABSTRACT
Michael Woodford joined Olympus in 1980 as a 20-year-old salesman for KeyMed, a British subsidiary that sold medical equipment. Olympus controlled more than 70 percent of the world’s endoscope market. Olympus’s problems began in September 1985 when the finance ministers of the United States, Japan, United Kingdom, France, and West Germany met at the Plaza Hotel in New York to devise a plan for devaluing the strong American dollar. With manufacturing profits declining, Olympus’s president Toshiro Shimoyama sought profits through financial investments. Most of Olympus’s Japanese institutional investors remained silent during the stock’s freefall. Olympus’s two-stage tobashi scheme replaced more than $1 billion of unrealized investment losses with a similar amount of goodwill. In stage one, the “loss separation” phase, Olympus created several unconsolidated dummy corporations registered in the Cayman Islands. In stage two, the “loss disposition” phase, Olympus transferred assets to the Cayman companies so they could repay their debts.
