How many strikes before a tech CEO is out?
In baseball, you get three strikes and you're out. As for technology CEOs, that depends. It depends on the magnitude and visibility of their screw-ups, the aggressiveness of the board, all kinds of things.
Sometimes it just takes one event, if it's big and hairy enough. On the other hand, I've seen CEOs swing and miss dozens of times for years on end, and they're still in the game.
Let's take a look at five recent examples of CEOs getting canned and see what we come up with:
Patricia Russo of Alcatel Lucent. It came as no surprise when Alcatel Lucent announced on July 29 that CEO Russo would step down. She had a decent run at the helm of Lucent, but the 2006 merger with Alcatel has been a disaster for both companies. This is a great example of one huge, high-visibility strike doing a CEO in. Incidentally, Chairman Serge Tchuruk is out, as well.
Diane Greene, VMware founder and ex-CEO
(Credit: CNET)Diane Greene of VMware. It was a shock when, on July 8, VMware's board announced it would replace founder and CEO Diane Greene with Paul Maritz of Microsoft. Still, profits and growth were slipping and the stock was sliding, in contrast to a solid IPO and a nice run-up in the months that followed. I'm not really sure what happened here, but it was sudden and it wasn't amicable, that's for sure.
Hector Ruiz of AMD. Just three weeks ago, Hector Ruiz agreed to resign after leading AMD to a $3.4 billion loss last year. Let's not forget that Ruiz had quite a run until everything started to fall apart in early 2006. This was another big, high visibility strike. Will successor Dirk Meyer fair better against mighty Intel. Doubtful.
Jo Major of Avanex. Since taking the reins in August of 2004, Jo Major actually managed to bring the optical component company back to profitability, although you wouldn't know it by looking at the share price. On July 7, the board suddenly fired Major, "due to the inability of Dr. Major and the Board of Directors to work together effectively," according to a press release. It may be subjective, but I'd still call that a big strike.
Ed Zander at Motorola. This wasn't so recent, but Motorola announced last November that Ed Zander would step down in favor of then-COO Greg Brown. During his four-year stint, Zander presided over the rise and fall of three things: the Razr, the company's market share, and most importantly, Motorola's share price. I guess a big win and a big loss don't cancel each other out.
Here's a bonus, with a twist:
Terry Semel and Jerry Yang of Yahoo. Yahoo shareholders began whining about stock performance versus Terry Semel's compensation just ahead of the 2007 shareholder's meeting. A week later, Semel was out and Yang was in. Now, on the heels of last week's annual meeting and a 30-something percent no-confidence vote, it could be Yang's turn. And this time, chairman Bostock may go with him. This also appears to be about a single event - the failed Microsoft negotiations. That said, I thought Yang was a poor choice from the start, and Bostock is the guy who put him there.
Summary
As you can see, all but one of the recent CEO exits were caused by big strikes. Is that as it should be? If the board doesn't see a credible plan for recovery, you bet. The one thing none of this shows is how many CEOs are still in the game after multiple strikes. Let's save that for another post, but I can tell you this - it's a lot more than five.
Steve Tobak is managing partner of Invisor Consulting LLC. He is a member of the CNET Blog Network, and is not an employee of CNET. Disclosure. 
- by BoardExpert August 14, 2008 2:15 AM PDT
- A board should ensure that they have a CEO who in their opinion is the best qualified person to lead the company in its strategy. If, in spite of aparent set backs, the board thinks the CEO is still the best candidate then they should keep him or her. If they think the strategy would be more likely to succeed under a different leader then they should change the CEO. If they think the strategy should change then they need to decide if they want to entrust the current CEO with developing a new strategy or if they want a new CEO.
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(3 Comments)It is impossible for an outsider to see which of these four choices a board is making (although if the CEO goes or stays at least some aspects of the choice are clear).
If anyone has a real doubt that the board is making one of these choices responsibly (i.e. if they suspect malfeasance) then they should raise the issue with the corporate regulators and provide them with proof. If anyone wants to change things they should stand for election to the board. And if anyone just wants to gossip; I guess a blog post is as good a methodology as any other!