Microsoft's Board Of Directors: Time For A Change

One cure I recently recommended for Microsoft was to split up the company. I challenged its board of directors to do so before shareholders stage a revolution.

(See What To Do With Microsoft? Chop Up The Borg - Now.)

The shareholders could do just that, and did so last week with HP’s board, because “shareholders elect the board to oversee management and to assure that shareholder long-term interests are served.” On its website, Microsoft further mentions that its board “oversees the company's business affairs and integrity, works with management to determine the company's mission and long-term strategy” etc., etc., etc.

Is Microsoft’s current board really doing a good job?

Microsoft's Board vs. Its Competitors

Microsoft’s competitors have similar charters. The duty of Google’s directors is “to oversee management and evaluate strategy,” and they are bound to assess “Google’s overall strategy and monitor Google’s performance against its operating plan and against the performance of its peers.”

I like how Google emphasizes oversight of management and evaluation of all the company’s strategies. Microsoft’s directors, on the other hand, are being directed to look after long-term shareholder interests and evaluate long-term company strategies. Could this be the reason - or an excuse - for missing so many short-term opportunities in the last decade?

The requirement for Google’s board to judge management’s performance against its competitors highlights the company’s competitive spirit. How well did Microsoft’s board do this over the last decade?

In a recent NBC interview, Microsoft's chairman - Bill Gates - said “amazing things” have happened under the tutelage of CEO Steve Ballmer. Most pundits would disagree. And so do I, knowing that in that same interview Gates contradicted himself by noting his unhappiness with Microsoft’s rate of innovation. Where does the buck stop in this regard: with Gates, with Ballmer or with the board?

What Makes A Good Board Of Directors?

Most tech companies’ shareholders have elected a mix of academics, venture capitalists and financiers to their boards. What interests me most is how well its members are actually educated and how much experience they bring to the table in regard to technology. Fortunately, their professional backgrounds are available on their companies’ websites.

It should surprise nobody that neither Steve Ballmer nor Bill Gates has a degree in computer science (Gates at least wrote software in the early days of the company, Ballmer has only managed developers). Neither has ever worked for an IT company outside Microsoft. Both have been Microsoft’s decisionmakers for more than 30 years.

Given that, you might expect Microsoft's board to include many directors knowledgeable about what goes on outside the company’s own technology realm! Yet I found only a meager three out of nine directors with such experience. And I graded on a curve, counting academic experience as real work experience.

(In comparison, Facebook looks like the weakest company in regard to directors’ tech experience, while Google’s strength is obvious. Its board wins in every category, and that may be a key reason why it constantly beats Microsoft.)

The Gates Era - And Afterward

I worked for 20 years at Microsoft - when Bill Gates was not only chairman and CEO but by far the company's largest shareholder. During that time, the Board was never as strong as I would have liked. Yet until Microsoft lost its landmark antitrust trial in 2000, Gates did a good job guiding the company through the turbulent PC revolution, with the help of Jon Shirley, Microsoft’s former president and long-term board member, former COO Bob Herbold, and others.

After Gates handed the CEO reins to Ballmer, things changed profoundly. Gates kept his chairman title even after he left the company in 2008, but the board did not get strengthened. I have served on several boards, and know how easy it is for a board to be reduced to a mere formality - especially when it's dominated by founders or longtime company executives.

Microsoft's Board Today - And Tomorrow

Microsoft’s tech leadership is being severely challenged. The chairman is no longer the respected tech guru he once seemed to be. Microsoft's CEO has never been mentioned as a technology leader. So who on the Board provides the required oversight of company's tech strategy? Who “works with management to determine the company's mission and long-term strategy” instead of just dealing with financial and procedural issues?

I can't spot enough people with sufficient intellectual firepower or market insight to properly evaluate the company's strategic objectives. Electing decent and well-meaning people to the Board is not enough to propel a company into the stratosphere of the highly competitive IT universe.

For the last decade, Microsoft has managed to produce respectable revenues and profits by incrementally improving already well-established products. To win over the long haul in a fast-changing market, though, a leader must relentlessly out-innovate competitors.

This was never Steve Ballmer’s personal strength. He needed help and I believe the board let him down, or maybe he didn’t listen carefully enough. I believe Microsoft’s shareholders need to overhaul their board and elect directors with tech foresight who will force the changes needed in the company's senior leadership team.

Experienced women and men should be on every board of directors to help guide the often younger executive teams. But sometimes this can be a severe handicap. Both Google’s and Facebook’s directors represent a younger generation than Microsoft’s. They seem to have a better handle on the pulse and the trends of the IT market.

Why can’t Microsoft attract that type of talent? Two thoughts cross my mind. First, Microsoft might no longer be exciting and reputable enough to attract top talent. Second, and worse, Gates and Ballmer seem to be controlling Microsoft as their personal playground - avoiding bringing in most capable directors who might eventually threaten their positions.

That’s the final straw for why I believe Microsoft’s board has served its time and should be replaced. Of course, if you really did chop up the Borg, as I recommended, this whole issue would naturally resolve itself.

Bill Gates image courtesy of 3777190317 / Shutterstock.