Accepting ValueAct and the turn into a medtech company (2019)

The meaning of making outside pressure the lever of change

The heart of this decision is that Olympus bound two hard problems — rebuilding fallen governance and narrowing the business — into a single move: accepting an activist shareholder. Many Japanese firms after the 2011 affair treated active shareholders as something to be defended against and kept them off the board. Takeuchi chose the opposite, inviting an outside shareholder in not to be shut out but as an agent of oversight and change. The shift to a company with a nominating committee and the appointment of foreign directors were also an attempt to rebuild, through outside eyes, the board’s oversight function that the affair had damaged.

At the same time, leaning on outside pressure for the momentum of change leaves a question. To move an organization turned inward by the affair, why was internal discipline not enough, and why did it take pressure from an outside shareholder? Takeuchi’s remark that “changing a Japanese organization takes outside pressure” is, turned over, an admission of a corporate temperament that struggles to change on its own. That letting go of its founding trades and purifying into medicine raised the company’s value is shown by the recovery in profit that followed. Even so, whether Olympus — now a pure medical-device company — can keep changing by disciplining itself, without making outside pressure its normal state, is the task left to it.