(Solved): Principal - Agency Relationship: Michael Woodford (MBE) took over as the CEO of the Japanese Olympu ...

Principal - Agency Relationship: Michael Woodford (MBE) took over as the CEO of the Japanese Olympus company in 2011. Within two weeks he discovered that the company had hidden $1.5B of illegal payments and investment losses in a 'tobashi scheme. He initiated a board meeting to discuss this but was dismissed by long-standing board members and prohibited to speak on the matter by the Chairman and previous CEO, Tsuyoshi Kikukawa. He became a Whistleblower by revealing this to the police and press. The outcome was that the company's shares lost 75% of their traded value and the previous CEO and Deputy President were forced to resign. As he had violated the cultural tradition of disrespecting his elders, the remaining board members and prominent shareholders refused to reinstate Woodford as the CEO 1. Would current corporate governance procedures and executive accountability help to ensure that this could not happen in UK listed companies? Justify your answer. 2. Should Woodford have been reinstated? 3. Should the board have been dismissed and, if so, who would choose the replacement members? Approaches to ethical practices by shareholding Stakeholders can influence a company into adopting and pursuing ethical practices by several means. Previously, this has mostly been by political acts such as boycotts and other disruptive activities (think of Fracking for onshore shale gas and community demonstrations). Given the "access" that shareholders have through formalised governance processes, practices and policies, this *opens up alternative avenues that social activists have exploited, of recent. Discuss what these might be.