With the arrests today in Japan of several people associated with Olympus and the serious alleged governance issues , we’re reminded in the health sector about the value of a set of independent eyes.
In October of last year, the organisation’s British CEO, Michael Woodward was, according to news reports, fired summarily by the Board after he raised concerns about significant sums of money (reportedly more than a third of the value of the deal) the Board were paying in advisory fees concerning a recent purchase of a UK company. It would appear from today’s news that these concerns are now shared by the authorities.
Board transparency is clearly being raised as a significant issue in the Olympus situation. As the NHS edges closer to a system where the transparency of its own spending decisions seems to be diminishing we therefore need to head the Olympus story as an early warning signal now and ensure we don’t allow the potential future lack of transparency to become material from the start. It seems clear to me that the Board of Olympus failed to effectively provide “independent” (non executive) oversight on behalf of its shareholders. I’m informed that only three of the 14 directors on the Olympus Board were independent. If there had been a balanced Board, maybe the independent directors would have spotted the issues before Woodford and as such he wouldn’t have needed to call in PWC (Price Waterhouse Coopers), to conduct an independent audit. The question is, will we maintain the required level of independent oversight in the system as the NHS has historically been used to, and has been deemed necessary, under the new commissioning arrangements? I’m not certain.
Where the Olympus issue will finish I cannot predict. What is interesting is that the results of the Independent review were distributed to the entire Board prior to Woodward leaving the organisation. It was because of the noise, created from the dismissal and not the independent report itself, that the attention of organisations like the U.S. Federal Bureau of Investigation, the U.K.’s Serious Fraud Office, and by authorities in Japan was given to the situation.
NB In December, Olympus announced a $1 billion hole in its balance sheet.