If you were Shuichi Takayama, President of Olympus, what would you do now?
Olympus has just escaped, by a whisker, being delisted from the Tokyo stock exchange. The financial reports that were submitted on 14 December to prevent this grizzly fate showed an ¥84 billion ($1.08 billion) reduction in net assets, and a loss of ¥32.3 billion ($414 million) over the past six months. And as a consequence, share prices have fallen by another 20%; let alone the descent that they took between the end of October and now - as a financial scandal of epic proportions unfolded before the world - which would have made Bode Miller proud.
On top of this, your board sacked the guy who uncovered all of these financial misdealings, basically because he had the audacity to do it. Of course, he's probably the person with the nous to get you out of this hole. Sorry, crater.
Olympus is running short on cash, your net assets are currently valued at ¥46 billion, and you need to do something, fast.
You've hinted at the possibility of a merger, either in the form of a capital tie-up or an operational or sales tie-up. This would help to bring the firm some much-needed cash, but at the cost of its independence. And who would you seek out for this tie-up? Hoya has just cut loose Pentax, so has the cash, but does it have the interest, and Fujifilm is on the up-and-up. But is this going to be best for Olympus?
Michael Woodford, the CEO whom you so unceremoniously sacked in October, has been quite open about his willingness to resume a role at Olympus, but it would be at your expense. He thinks it would be best to wipe the slate clean with a mass culling of the board, and the independent inquiry commissioned to find out just what was going on in your company suggested something similar. You of course would rather stay where you are, or at least ensure that who ever is in control next is of your choosing. Does this really help Olympus?
Woodford knows that Olympus needs to recapitalise, and swiftly, but he's against any kind of merger that would threaten its independence and he doesn't want to break up or sell the company to which he dedicated 30 years of his career. Instead, he'd seek out private equity or even consider a rights issue, when existing shareholders are issued warrants to buy new stock. Would he manage it? Who knows. Who knows if the rot hasn't set in too badly and Olympus isn't beyond redemption. But maybe he has the best chance.
If you want to rescue the company that we all suspect you love, Mr Takayama, from an ignominious fate, it might be optimal if you and the rest of the board fell on your swords. It might appear a drastic action, but the situation is dire. Piecemeal offerings, the continued taint of scandal, and puerile attempts to ensure some degree of control of the company even after you've gone won't help. Go now, and go with grace.