Microsoft: How financial reform is changing corporate governance
Apparently, corporate lieutenants are getting a lot more power, if The Daily Beast is to be believed. This story today claims that some senior Microsoft executives, unhappy with the share price under the leadership of Steve Ballmer, are secretly discussing an insurrection against the hard-charging CEO.
The story reports that these executives would like to "add board seats or replace current directors at the end of their term with CEO-ready candidates who could both provide Ballmer with guidance and be there to step into an interim role as CEO if he resigns."
I know Microsoft gives out a lot of stock options. But unless these executives are planning to bring in some very powerful institutional shareholders or have the support of the board--neither of which the story says they do--the notion of a successful executive coup d'etat is just silly.
It's not as if adding or replacing corporate directors is just a matter of making it happen. If it was, shareholders wouldn't have been fighting for years for the right to "proxy access," or the ability to nominate their own candidates to the board. As the confusing and admittedly dry world of corporate governance works now, voting in directors who weren't first nominated by the board requires an extremely expensive campaign that even deep-pocketed mutual fund and hedge fund managers often aren't willing to take on.
If that's the case, why might these executives be talking about this now, when Microsoft's stock price is about the same as it was five years ago? If the story's sources are indeed serious, it's likely because they have the support of one or several major shareholders, and possibly because they see a window in the financial reform bill President Obama signed yesterday. One thing the bill does is give the Securities and Exchange Commission the authority to make a rule about giving shareholders the right to put nominees on the ballot.
If that sounds convoluted, it is: The reform bill does not yet make proxy access reality, although the SEC has written a proposed rule that business interests are sure to fight at every turn. Even once shareholders get their way, they'll still need to own a certain percentage--as the rule is written now, 1% of Microsoft's millions of outstanding shares--to get their own nominees up for vote.
But this morning's story reveals more than just the extreme unlikelihood that disgruntled execs can single-handedly change the makeup of Microsoft's board. It notes that there are no obvious successors in the company, revealing a lot about the company's leadership bench. If there are all these senior executives who want to bring in outside directors who might one day replace Ballmer, why don't they want to nominate one of their own?
Perhaps because they just don't want to have to run around a stage like this:
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