Spilling the beans about a scandal cost Olympus’s British-born CEO Michael Woodford his job as the company's board of directors voted unanimously to oust him. He stepped down from the firm's board of directors on Thursday, rumoured to be a gambit in order to place him in a strategic position ultimately to return to his old job.

Would it be a loss of face for a Japanese company to admit it needs a foreigner to restore corporate credibility and discipline? Should it, could it, happen?

It is not for us to say. But in a word, ‘yes’.

Trying to assimilate non-Japanese firms into the Japan model has always been hard. That task is not made easier by scandals such as that which erupted in October 2011 concerning the acquisition of British medical equipment firm Gyrus by camera manufacturer Olympus Corp.

It has been reported that the $2 billion deal that took place in 2008 factored in undisclosed fees of $687 million, payable to parties unknown. Some of that money has been attributed to window dressing of previous years’ operating losses, but there is still a lot of money unaccounted for at Olympus.

So what should investors do?

“They may prefer to fight to recover at least some of the losses,” says Tadashi Kageyama, head of Kroll Asia, in a statement on the issue, “rather than sell short, write off or hold in the hope that the company is delisted and later refloated. The key is to be proactive, stay one step ahead of the local regulators and prosecutor.”

Staying one step ahead of a prosecutor always seems like a smart move.

Kageyama also urges investors to seek out red flags, such as a frequent change of directors or resignation of an auditor – both of which happened with Olympus.

In May 2009, Olympus’s auditors KPMG were replaced by Ernst & Young. The official release said that the auditors’ term of office had expired, but in an internal memo the then Olympus chairman, Tsuyoshi Kikukawa (who stepped down in October), said that there had been a disagreement with the auditors.

Should potential investors be concerned about other Japanese companies in their portfolios? Clearly they should, if those companies are not exercising certain standards of corporate governance and transparency.

“It is wise to be mindful of cultural issues which can be at play,” says Kageyama. “While Japanese staff respond in the same way as American or European counterparts to issues related to organised crime, product safety or individual corruption, they may not be so willing to reveal a case of corporate fraud which benefits the team as a whole.”