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Don’t Let Foxes Guard the Hen House

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Don’t Let Foxes Guard the Hen House

Go ahead, snap a picture, but the result is not going to be very pretty. It was downright depressing to read the Wall Street Journal article (“Olympus Hotline Didn’t Blow Whistle”) about the compliance program issues and executive misdoings at the Japanese camera maker. It may be a new year, but it’s started off with another epic ethics failure.

First, the FBI is called in to investigate Olympus after it abruptly dismissed its chief executive, Michael Woodford, only to see him turn into a whistleblower. Allegedly it would seem that Olympus made some excessive and even shady over-payments involving a corporate acquisition. The company then admitted that it covered up investment losses for decades and used a series of acquisitions to clean up its books.

Now out of the darkroom comes a pair of enlightening revelations: first, the Olympus executives who were behind the cover-ups were also responsible for the company’s compliance hotline program; and second, Olympus actively cultivated an environment of autocratic rule and denial that makes an ethical culture an impossibility.

The WSJ article, which cites the findings of an independent investigation panel, says that the company’s former internal auditor and head of the compliance function, Hideo Yamada, “strongly opposed” the idea of a hotline run by an outside party. Talk about the fox guarding the hen house.

And then, there’s the matter of how ethics was seemingly frowned upon. Apparently it was widely known and accepted that actions by the senior executives were not to be questioned, even if the actions appeared unethical. While Olympus had a hotline – Japan has legislation similar to Sarbanes-Oxley in the US which mandates anonymous compliance hotlines – corporate protocol was to ask employees to identify themselves when those tips required further investigation.

Frankly, I’m appalled at both the lack of ethical leadership and the outright dismissal of accepted compliance best practices for a corporation the size of Olympus. It’s also amazing that these excessive bad actions could take place for as long as they did. No doubt, the over exposure is going to cause some major grief.

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