The scandal came to a head yesterday, when an independent panel revealed their findings: Olympus had hidden $1.7 billion in losses since the early 1990's.
Today, in an official statement, Olympus president Shuichi Takayama announced the board's plan to step down by the end of February 2012.
An extraordinary meeting of shareholders will be called to decide how to rebuild the board. It is clear that Takayama has no intention of retaining his position.
The company faces potential delisting from the Tokyo Stock Exchange, and has been given a December 14th deadline to submit its most recent financial reports. Olympus also intends to give revised reports from the past five years.
Unfortunately, even if the company does make this deadline, it could still face delisting, which could force the company into a rapid decline; if not complete closure.
The company could be forced to sell off their core assets.
The value of the companies stocks have plummeted since the scandal blew up in October, following the firing of chief executive, Michael C. Woodford.
The company had dismissed Woodford after raising issues over dubious spending and transactions.
The independent panel cited Woodford's dismissal as another example of the dysfunction in the Olympus board of directors. The board dismissed him without investigating the issues that he had raised.
Woodford brought to light a massive scandal that continued to stew unnoticed for years. But in spite of his dismissal, it seems that he has not given up on the company.
Woodford had previously stated that he would happily take back his old position, and is lobbying for shareholder support to replace the board of directors.
Takayama maintained in his statement today that the board's assessment of Woodford as "too selfish" remained, but acknowledged Woodford's part in revealing the scandal.
He went on to says that it was in the hands of shareholders to decide whether or not to bring Woodford in as his successor.
Extensive investigation is planned to get to the bottom of this mess. Some 70 current and former executives are expected to be held responsible for their part in the scandal.
The important question to be asked is, why exactly was this allowed to happen? If Olympus had been concealing debts since the Japanese stock crash in the 1990's, how had this continued for twenty years?
Some have cast blame on the Japanese business mentality itself -- citing an extreme form of sectionalism that left all the power and responsibility in the hands of the very few.
The board continued these practices unquestioned for some time, suggesting that directors were truly indifferent to business outside their jurisdiction.
Takayama said another cause was that: "the management system had become too much about one man".
Indeed, the panel suggested that the Japanese culture of corporate loyalty played a huge part -- and reflected the 'group mentality of the typical salaryman'. Discussion and decisions among the board would, eventually, be in the hands of the company President.
The current board has given itself only a short period of time to fix some of the damage caused, but the biggest challenge may be for their successors in February.
If Woodford does take over Olympus once more, that might restore some confidence in shareholders. But the scandal may have irreparably damaged Olympus' reputation.
The company has promised full disclosure over any further investigations, and has provided the full third-party report on its website.
Needless to say the next few months will be vital. Can Olympus bounce back from this? Unfortunately, with another 9.2 percent drop in share values today, the forecast doesn't look so good.
- Olympus’ downfall: Corruption, scandal, and ‘rotten’ management
- ZDNet Asia: Ex-CEO Woodford resigns from Olympus board
- Olympus fires British, 'loud-mouthed' CEO