The Anatomy of an Iconic CEO Firing

by Patrick Moorhead   |   August 27th, 2013

Unless you were on vacation in Alaska last week, you know that Microsoft announced that CEO Steve Ballmer would retire in 12 months and that a special board committee had been formed to find his replacement.  The departure was positioned as voluntary, but there has been a lot of pontification and doubt about that claim.  I personally doubt CEO Steve Ballmer left voluntary and believe he had some pushing from the board.  After personally watching many CEOs come and go, I thought it would be valuable to share some insights from my nearly 25 years of Fortune 500 company experience so you can arrive at your own conclusion. 

The first thing I want to stress is that some CEOs do actually leave the company voluntarily.  There are a few key signs to look for:

  • Public succession planning process named the replacement 6-12 months before the old CEO leaves
  • The old CEO takes the chairman of the board seat (don’t be fooled by just a seat on the board or chairman emeritus)
  • CEO is of retirement age
  • CEO leaves the company and goes immediately to another company
  • CEO cites family or health challenges (don’t confuse with the “leaving to spend more time with the family” schtick)
  • Company’s stock performance has outperformed their peers

It’s important to get into the head of the board of directors, because they really call the shots when it comes to firing a CEO.  When it comes to CEO hirings and firings, the board is there to not only find the right people, but also to make sure that when firing a CEO, the company looks as good as it can.  They balance throwing the CEO under the bus versus the downstream implications to other stakeholders like investors, employees, suppliers, and customers. If throwing the CEO under the bus makes the company look even more screwed up or even mean, they will opt to position the departure as an amicable departure.  If publicly and openly taking out the CEO makes the company look good, they’ll do that.

The best case scenario for a board who wants a new CEO is to quickly drive them to quit on their own and orchestrate events to make it look amicable.  This happens every day in corporate America. Typically, the CEO will be pulled into a special meeting where the board will express their displeasure in something the CEO or the company has done or that the board has been “thinking” that something should change.  The board then makes what the CEO believes is an untenable request.  That request could be to hit a specific metric in a specific time or just a dictate of a decision they’d like the CEO to make.  The CEO either quits on the spot under a specific separation package or after the meeting.  The board has been through this many times and it works like clock-work.

Now let’s get into the head of the departing CEO whose board doesn’t want them anymore.  The departing CEO wants to save as much face as possible, as their friends, family, business associates and potential future employer are watching.  Their desire is to position the exit as their decision, not anyone else’s, and certainly without a board commenting poorly on past performance or decisions.  Departing CEOs don’t want to be perceived as having been leaving mess, because no future employer wants that carry-over drama.

So what does a firing positioned as an amicable separation look like?  Here are a few signs, which, in some sense, is the antithesis of a CEO actually leaving on their own:

  • CEO leaves well before the board’s succession plan called for
  • CEO didn’t leave immediately for another company or cite health or family problems
  • CEO leaves well before a turnaround is complete
  • Company’s stock under-performs their peers
  • CEO isn’t invited to take the chairman seat
  • CEO leaves after a major and very public company gaffe

Microsoft’s Steve Ballmer made some very telling comments in ZDNet’s Mary Jo Foley’s interview.

“Q: When did you actually decide you were going to retire? Was this a sudden decision?

Ballmer: I would say for me, yeah, I’ve thought about it for a long time, but the timing became more clear to me over the course of the last few months. You know, we worked hard. We worked hard on our strategy process, our org process. And frankly I had no time to think about it during all of that…. I would say my thinking has intensified really over the last couple, two, two and a half months, something like that.” 

“Q: So when did you finally decide?

Ballmer: Officially, a day or two ago. We had a board call. When was that, two days ago? And it was really two days ago … I would say that we really — I finalized and we finalized that this was the right path forward.”

“Q: What’s next for you now?

Ballmer: Frankly I don’t know. I haven’t spent a lot of time — I don’t have time to spend actually even thinking about what comes next. I’m not going to have time to do that until the board gets a successor in place.My whole life has been about my family and about Microsoft. And I do relish the idea that I’ll have another chapter, a chapter two, if you will, of my life where I’ll get to sort of experience other sides of life, learn more about myself, all of that, but it’s not like I leave with a specific plan in mind.”

What I don’t fully understand is that if this has been in the works for years with intense thinking over the past few months, why no ideas about next steps?

“Q: What are you guys looking for in a successor?

Thompson: Well, we’ve had a process underway for quite some time to think through what the attributes of the successor would need to be. We’ve worked with an outside firm, Heidrick and Struggles, to help us define that. But I don’t think we’re ready to declare that externally at this point in time. We are well down the path in the search, and hopefully in some reasonable amount of time we’ll have a new leader.”

Similar point here.  If this has been in play for years with intense activity over the last few months and if the new strategy and org is so sound, why doesn’t the board know of the characteristics they want in a new CEO?  Were they trying to save face for Ballmer here?

So, did Ballmer leave on his own or was he motivated or pushed by the board to leave?  I’ll let you make up your own mind.  I urge you to read Microsoft’s press release and also Ballmer’s letter to the troops. I believe, based on my experiences with large companies the last 23 years that Ballmer was pushed to leave or was put under some very aggressive directives by the board.  What do you think?

Patrick Moorhead

Patrick Moorhead was ranked the #1 technology industry analyst by Apollo Research for the U.S. and EMEA in May, 2013.. He is President and Principal Analyst of Moor Insights & Strategy, a high tech analyst firm focused on the ecosystem intersections of the phone, tablet, PC, TV, datacenter and cloud. Moorhead departed AMD in 2011 where he served as Corporate Vice President and Corporate Fellow in the strategy group. There, he developed long-term strategies for mobile computing devices and personal computers. In his 11 years at AMD he also led product management, business planning, product marketing, regional marketing, channel marketing, and corporate marketing. Moorhead worked at Compaq Computer Corp. during their run to the #1 market share leader position in personal computers. Moorhead also served as an executive at AltaVista E-commerce during their peak and pioneered cost per click e-commerce models.
  • Nedeljko Kovačević

    …or he was “properly motivated” to make departure decision on the last board call ;-) ‘m so curious what’s the board plan of the future and where do they see new CEO!? I’m certain it’ll be external person, but who? More exciting then the guessing game about upcoming gadgets :-)

  • FalKirk

    ‘did Ballmer leave on his own or was he motivated or pushed by the board to leave?”

    Ballmer was shoved and shoved hard.

  • http://blog.nordquist.org Brett Nordquist

    Ballmer’s email to the troops was telling. It was devoid of emotion and focused mainly on numbers, in an almost, “See what I did!” way. The timing is also odd, as you mentioned, with the major reorg barely underway. Why not allow the incoming CEO to make that decision? It seems like now he’s stuck with Ballmer’s plan for the future in terms of the organization which isn’t going very well. I believe Microsoft is now in the situation of searching for a CEO who doesn’t exist.