Monday, April 6, 2009

Elephant in the Boardroom

In the comment section of "Who Will Lead Microsoft" is this anonymous comment:

"The elephant in the boardroom is Ballmer's relationship with Gates. Ballmer is the best friend and college buddy of the founder, chairman and biggest shareholder of the company. Ballmer probably can't be fired unless Gates wants him to be fired. And Gates is a loyal friend. Ballmer is also a board member and major shareholder, with 4 percent of the company (Bill Gates himself owns less than 10 percent). It's an unhealthy situation for Microsoft and its shareholders."

When this campaign was launched we were aware of Mr. Gates and Mr. Ballmer being significant shareholders. However, it is the final statement within the above comment that can provide tremendous discussion. Ultimately, there are numerous unhealthy situations for Microsoft and its shareholders.

This campaign has addressed some of the unhealthy situations for Microsoft. The campaign has provided analysis of the financial situations confronting the company. The loss of OS share, the growing popularity of the Internet (search and advertising) and the dominance of Google. The introduction of netbooks, SaaS and handhelds.

Microsoft is lost and floundering. The company lacks vision and direction. This campaign has referred to the ill-conceived Yahoo bid. Massive spending. This campaign has referred to the numerous acquisitions, massive R&D spending and the $40 billion deployed on share buybacks. Microsoft has for several decades controlled a massive amount of cash. However, it has failed to elevate the share price. Ultimately, capital without vision and direction fails to be an asset. In Microsoft's case it has become a liability.

There was a period when it was innovative and a darling of Wall Street. However, those days are long gone. Microsoft has been replaced by Apple and Google. Refer to:

In addition to this campaign's analysis there are numerous Wall Street analysts referring to Microsoft's loss of share. However, there are also numerous internal situations that confront Microsoft. This leads to the next point.

In the post "Could Microsoft Become the Next General Motors" this campaign provides a qualitative analysis of additional Microsoft dilemmas. A simple review of MSFTextreme or Mini-Microsoft and it becomes clear that numerous employees are frustrated with the company. The company is confronted with poor employee morale.

The company is also confronted with poor company image. Microsoft has lost consumer loyalty through poor products (such as Windows that freeze, Zune, MSN and the failure of Vista). It has also been the target of Apple through advertising. Microsoft's campaign has failed to improve the company image. Brand expert Rob Frankel states that the new commercials by Microsoft will prove detrimental to the company. Refer to: http://www.newsfactor.com/story.xhtml?story_id=65597&full_skip=1

There is still the elephant in the room. ( This is a term referring to a big problem that often fails to be addressed). Mr. Ballmer is a friend of founder and shareholder Mr. Gates. Granted they are friends. However, friendship aside, business is business. Reality check for Mr. Gates and Mr. Ballmer is simply--Microsoft is a business. Therefore, as a business there requires accountability. This leads to the next point.

Mr. Gates and Mr. Ballmer are substantial shareholders. However, as a business there are also numerous other shareholders. This includes both small shareholders and large institutions. For a decade shareholders have witnessed the shares remain stagnant. Refer to: http://seekingalpha.com/article/63975-lots-of-overlap-between-top-yahoo-microsoft-shareholders

Shareholders have every right to ask management tough questions. They also have every right as stakeholders in the company to demand change. This leads to the final point.

There is without a doubt a elephant in the room. However, the room we are referring to is not Mr. Gates livingroom. That is the place for friendship. The place we are referring to is the Boardroom. As mentioned, this is a place of business. Refer to: http://itmanagement.earthweb.com/columns/executive_tech/article.php/11282_3745546_2


According to the Microsoft website is the following:


Corporate governance at Microsoft serves several purposes:

1)To establish and preserve management accountability to Microsoft's owners by appropriately distributing rights and responsibilities among Microsoft Board members, managers, and shareholders.


2)To encourage the efficient use of resources, and to require accountability for stewardship of those resources.


Since Mr. Ballmer has failed in the effecient use of resources, the above states that it requires accountabilty for stewardship. Therefore, the Board is required to address its mandate and preserve management accoutability to Microsoft's owners.

Mr. Ballmer has failed in effecient use of resources. Massive spending on acquisitions that have failed to increase share. Massive spending on R&D that have failed to translate into innovation. Massive spending on share buybacks that have failed to elevate the share price. Massive spending on advertisements that have failed to improve the battered company image.

Perhaps the biggest resource Mr. Ballmer failed to utilize was Microsoft employees. Mr. Ballmer failed to use talented employees to propel innovation. Mr. Ballmer failed to listen to employees who have for years on blogs such as Mini-Microsoft indicated that Mr. Ballmer refuses to listen.

This campaign's belief is simple. A CEO who refuses to have a open door to their employees needs to be shown the door. Granted that typically CEO's are intelligent individuals, it is the employees that are in the trenches and failure by a CEO to listen to employees leads to the failure of the company.

The Board of Directors is required to act within the best interest of the company and its owner's. Numerous employees and shareholders have stated that Mr. Ballmer is required to resign. Despite that fact that there is a elephant in the room, it is still a Boardroom, and therefore the Board is required to act in the interest of shareholders. The Board is accountable to act in the interest of shareholders. Therefore, they are required to remove the elephant and ultimately remove Mr. Ballmer.

This campaign is seeking to rally support through shares. Through rallying votes, shareholders have the potential to force the Board to address the elephant in the room and remove Mr. Ballmer. Failure by the Board to comply and act in the interest of shareholders, places accountability on the Board. If they fail to remove Mr.Ballmer then subsequently the Board should be removed at the next shareholder meeting as shareholders exercise their vote against the Board.


To offer support through shares contact




We can be contacted at thecrandreagroup@hotmail.com