(CNN) -- Shareholders of the Olympus Corp. approved a new board Friday despite objections from a vocal minority of shareholders seeking new management that can distance the company from the $1.7 billion cover-up that rocked Japan Inc.
The extraordinary shareholders meeting started with the outgoing president, Shuichi Takayama, apologizing to the investors on the cover-up of the losses. He was greeted by boos and hisses.
Allegations against the Japanese camera and medical equipment maker came to light after the October dismissal of former President Michael Woodford -- a rare foreign chief executive in corporate Japan -- after he questioned ex-board members about dubious transactions at the center of the case.
A special audit of Olympus in December, led by a former Japanese Supreme Court judge, detailed $1.7 billion of hidden losses from failed investments in the 1990s by the company. The report blasted the culture of the company that allowed the losses to be disguised in dubious fees and overvalued payments for companies, as well as the tight control of ex-Chairman Tusyoshi Kikukawa. "The management was rotten to the core, and infected those around it," the panel's report said.
Japanese prosecutors arrested seven people tied to the accounting fraud in February, including Kikukawa, ex-Executive Vice President Hisashi Mori and former Auditor Hideo Yamada. Four others arrested were financial advisers who allegedly assisted Olympus executives in the cover-up.
The former 11 members of the Olympus board stepped down en masse Friday. The new management includes Yasuyuki Kimoto, a former director of Sumitomo Mitsui Bank, who becomes chairman, while Hiroyuki Sasa, an Olympus executive officer, is promoted to president.
Critics -- including Woodford and Institutional Shareholder Services -- opposed the "insider" appointments, questioning Kimoto's ties to Sumitomo, the company's biggest lender. Woodford also questioned Sasa's experience to lead Olympus out from under the shadow of the scandal.
Olympus released a statement April 11 reaffirming support for the candidates, noting that the majority of new board members are independent outside directors. "Mr. Sasa's career spans 30 years in the Company's core Medical Business, and in recent years he has been deeply involved in the management of this core business," Olympus said in a statement. Olympus is the world's largest maker of endoscopes, and Sasa is currently director of Olympus Medical Services.
"Today would become the touchstone for new Olympus. I would like to ask about the reason of my dismissal," Woodford told Japanese media before entering today's meeting. Company officials refused to answer Woodford's question at the meeting, citing ongoing litigation.
Woodford is is suing Olympus for wrongful termination. He released a book in Japanese this week on the scandal entitled "Terminated."
Woodford gave up his public fight to be reinstated as chief executive in January. Meeting with the press yesterday in Tokyo, Woodford said he wanted to shine light on corporate governance in Japan.
"I'm not a magician ... it is 'Alice in Wonderland,'" Woodford said Thursday at the Tokyo Foreign Correspondent's Club. "All I can do is draw attention to it."
Olympus shares lost nearly 80% of its market value in the weeks after Woodford went public with his allegations. The stock is now half its value before the scandal broke. Olympus was fined $2.4 million earlier this by Japanese regulators for filing false financial results.
The Olympus saga started with a five-page expose in Japanese magazine FACTA -- a small circulation magazine that has only nine people on staff -- on July 20 that raised questions over advisory fees of $687 million paid in 2008 for the purchase of Gyrus, a UK medical instruments firm. The article also questioned the $773 million paid for three small Japanese companies -- a face cream maker, a plastic container maker and a recycling business, each with fewer than 50 employees.
CNN's Junko Ogura contributed to this article