Where Is the Microsoft Board?

Summing Up

The predominance of opinions expressed a concern about what happened in Microsoft's dispute with the Government and laid the blame at the feet of both the company's leadership and of board members who either supported the leadership or, if they didn't, were not able to make their views heard.

But a significant number supported Bill Gates and the board and weren't even sure that, when the final result is known, it will be a net minus for the company. They generally took issue with one or more premises including: (1) that the outcome of the dispute would be a negative one for Microsoft caused by (2) a defense personally led by Bill Gates and (3) by the failure of the company's board to provide counsel.

Those taking issue with these premises generally saw the company's leadership with the support of the board consciously standing on principle, whether defending the right to innovate or standing up against the Government's regulatory bias. There was some feeling in this group that Microsoft was unlucky in drawing a judge who turned out to be hostile to their cause. Matt Deter's remarks typify this position. As he put it, "Antitrust law is a set of laws the government uses to enforce their whims and desires...For Microsoft to treat such a system of non-objective law with disdain ... and contempt ... is a commendable and uplifting act of principle."

Questioning whether outside board members provide all that much added objectivity and influence and pointing to the success of the company, Bruce Lowenthal said "...I would rather address the problem of board inaction when things are not going well even with a high percentage of outside representation."

The views of those essentially lamenting the result but questioning the board's ability to do much about it were summed up in Erich Almasy's comment that what happened "is more a function of Bill Gates' dominant personality than the Board's immaturity. When I look at GE's Board I see ... a kind of Super Board. Yet, I wonder how often they confront, much less contradict, Jack Welch." As Tom Broge put it, "If someone can figure out how to get people to listen to good advice when they don't want to hear it, now THAT would be something big."

Moris Simson's thought-provoking response was typical of those that raised more questions than they answered. In his words, "As long as shareholder value maximization is the sole focus of Boards in a capitalistic context, objectivity in judgment is at risk: putting shareholders above all stakeholders is not a sustainable proposition, especially in the Knowledge Economy where employees are the most valuable asset." It was one of several that questioned whether governance policies and practices are designed to achieve what many felt to be their primary purpose, to foster the long-term success of the corporation on behalf of all stakeholders. What do you think?

Original Article

Governance in start-ups is different than in established large organizations. More often, a director is an investor, friend, expert, and resource. Involvement of a director is more intense, often resulting in daily or at least weekly contact with management at all levels. Insiders are the rule. Committees for audit or compensation are either non-existent or academic. And the founder and largest shareholder is very active in governance matters.

Then the public offering occurs. Regulation or law requires changes in behavior. Outside members of the board take on greater significance. Committees are required. The board now has undivided responsibility to shareholders other than the founding group of investors. And audit and governance, whether or not the founder is still on board, become higher-priority issues. At least in theory.

However, theory doesn't seem to have held up well among a number of the recent high-tech firms that have issued stock to the public. Insiders still rule. A minimum of required committee work is done. And investors seem not to have been too concerned about governance, given the meteoric performance of many newly-issued stocks.

To whom should maturing high-tech start-ups be able to look for guidance regarding matters of governance? One place might be their counterparts that have successfully achieved post-adolescent industry leadership, companies like Microsoft. But what kind of model has Microsoft provided in the way of governance?

In many ways, its board still looks a lot like that of a start-up. Of the typically seven members in recent years, only two could be regarded as outsiders. Last year, two of the outsiders failed to meet board or committee attendance guidelines generally thought appropriate for public companies. One of them resigned because of other demands on her time.

Now comes the government's anti-trust suit against Microsoft, a suit that we are told was decided on both its merit as well as the behavior of Microsoft's management, its lack of contrition, and its disdainful attitude toward government bureaucrats.

The merit of the case is what it is. But what could the Microsoft board have done to counsel management about the company's conduct of the case? Would management, particularly the company's founder, have listened? Does the board at least have the responsibility to try to provide such counsel? Assuming that the founder might have been most willing to listen to a board member who was CEO of another company, would it have helped to have more than one such person (the most Microsoft had during this period) on its board? What can newer high tech-start-ups do to avoid the board situation that Microsoft has found itself in?