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Microsoft gets a new CEO: Thoughts on Corporate Governance

The Discussion Issue

There is nothing that crystallizes the corporate governance question, i.e., the question of whose interests are being best served in a company, than the search for a new CEO. In the process, we get to see how independent a board is in its deliberations (from insider influence and past CEOs throwing their weight around) and what it weighs into its decision making.

Microsoft has a new CEO

Microsoft just announced that Satya Nadella would be the new CEO for the company. This search was triggered by Steve Ballmer's surprise decision to step down as CEO last year, but that decision itself may have been precipitated by some investors agitating for change.

  1. The first article provides background on Microsoft's history as a company (as told by Microsoft) and a perspective on its last (mostly troubled) decade. You can also take a look at Microsoft's financials over the decade on Yahoo! Finance.
  2. The second one is an interview with Steve Ballmer, from when he stepped down as CEO. He is surprisingly candid about what he did well and what he did badly as CEO.
  3. The third link is an article that previews the CEO search process and what the company might be looking for
  4. The fourth link is to the board of directors at Microsoft in 2013. These are the people who are choosing the next CEO.
  5. The fifth link is one to the compensation paid out to the very top people at Microsoft in 2013.
  6. The last link is from today's paper on the naming of Satya Nadella as the new CEO.

Key Questions

  1. Microsoft's stock price and market capitalization have stagnated for more than a decade. The company has not had a big hit (in terms of delivering large and continuing profits) in two decades and it has been pushed to the back of the innovation/technology bus first by Apple and now by Google & Facebook. Why do you think this has happened and how much do you think that the top management at Microsoft can be held responsible for this?
  2. Given your answer to the first question, what would you view as the key characteristics that the next CEO of Microsoft has to possess? Why?
  3. Taking a look at the current board of directors, what type of choice do you think that they will make (safe or risky, insider or outsider)?
  4. If you were an investor with clout in Microsoft, what would you do next?