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October 1, 2013 at 6:18 PM
Report: Some top Microsoft investors want Bill Gates off the board [updated]
Several of Microsoft’s top investors feel Microsoft co-founder and board chairman Bill Gates’ presence on the board is now a hindrance and are lobbying the board to push for Gates to step down as chairman, according to a Reuters report.
The report, which cites “people familiar with the matter,” says that three of Microsoft’s top 20 investors are lobbying for the ouster, believing that “Gates’ presence on the board effectively blocks the adoption of new strategies and would limit the power of a new chief executive to make substantial changes. In particular, they point to Gates’ role on the special committee searching for Ballmer’s successor. They are also worried that Gates – who spends most of his time on his philanthropic foundation – wields power out of proportion to his declining shareholding.”
The three investors together hold more than 5 percent of Microsoft’s stock, the Reuters report said, while Gates owns about 4.5 percent.
Several of Microsoft’s investors have been agitating for change of late. Activist investor ValueAct recently gained the option of having a seat on the board, and its involvement may have helped spur CEO Steve Ballmer’s decision to announce that he will be retiring once his successor has been found. Ballmer has denied that ValueAct played any role in his decision.
Microsoft declined to comment on the matter.
The push by some of the investors to get Gates to step down as chairman “is reflective of frustration on the part of shareholders that the stock hasn’t performed better and that the company hasn’t performed better,” said veteran Microsoft analyst Rick Sherlund of investment bank Nomura. “Ultimately, they hold the board accountable for that.”
Sherlund also believes that those investors may be concerned that Gates may advocate, as Microsoft’s next CEO, someone that the rest of the shareholders might not approve of. (Gates is on the committee that is choosing the next CEO)
“I don’t share that concern,” Sherlund said. “I think it’s important for Bill to be there now.”
Ultimately, while those investors may reflect the frustration of many shareholders about Microsoft’s stock price remaining essentially flat over the past decade, Sherlund doesn’t expect them to succeed in getting Gates to step down.
Those investors own a relatively small share of Microsoft’s stock, Sherlund said, and “I don’t think they’re going to get investors asking Bill to leave.”