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Barel Karsan
Barel Karsan

Book Review: Exposure

February 28, 2014

When a corporate scandal is ongoing in real-time, we outsiders haven't a clue as to what's going on behind the scenes. The involved parties clam-up to protect themselves while simultaneously launching public relations campaigns to come across as innocent. But the details do come out later.

Two years ago, the Olympus scandal rocked the corporate world. Olympus' CEO at the time has now written a tell-all book called Exposure detailing how the whole thing went down.

The book illustrates how poor corporate governance can destroy shareholder capital. Managers at Olympus took reckless risks, and then tried to hide their losses in illegal ways. Such was their grip on the company, that even when the abuses came to light, they tried somewhat successfully for a time to sweep the whole thing under the rug.

The fraudulent managers at Olympus were also aided by the cross-holding nature of shares that is so common in Japan. But I think it would be a mistake to assume such scandals can only happen in Japan. I would argue that a major factor leading to this fraud was the poorly-aligned incentive structure at Olympus. That's a problem everywhere, and leads to poor decisions with capital, which I suppose brings with it the temptation of fraud.

While I think Woodford did a good job detailing the entire story of the scandal to that point, I think he missed an opportunity to delve into what can be done to prevent such behaviour in the future. The book was good, but I especially look forward to the motion picture (trailer below) which appears to have taken some creative license from the original text.

About the author:

Barel Karsan
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now pre-order his book Invest Like a Guru on Amazon.

Rating: 3.0/5 (1 vote)


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