Microsoft Chairman Bill Gates Faces Calls to Step Down

Top Microsoft investors are pressuring tech pioneer Bill Gates to step down as chairman of the software giant as big leadership changes are under way.

In an Oct. 1 report, Reuters revealed that three top investors are "lobbying the board to press for Bill Gates to step down as chairman of the software company he co-founded 38 years ago." The three investors, whose identities are being kept under wraps, "hold more than 5 percent" of the company's stock.

"Gates owns about 4.5 percent of the $277 billion company and is its largest individual shareholder," reminded the report's authors, Nadia Damouni and Bill Rigby. Gates sells roughly 80 million shares of Microsoft each year, a rate that will leave him "with no financial stake in the company by 2018" if that continues, and it is causing worries among the investors that he "wields power out of proportion to his declining shareholding."

Those calling for Gates' ouster take issue with his role on the committee tasked with selecting Steve Ballmer's replacement as CEO. Ballmer announced on Aug. 23 that he was retiring from Microsoft within a year and upon finding a replacement. The news followed the July 11 announcement of a massive reorganization effort, part of a new "One Microsoft" strategy, which is meant to speed the software company's transition into a devices and services company by bringing its sprawling engineering areas and software divisions into closer alignment.

"There is never a perfect time for this type of transition, but now is the right time. We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team," said Ballmer in a statement. The influential Gates is expected to be a hands-on member of the committee to name Ballmer's successor.

"As a member of the succession planning committee, I'll work closely with the other members of the board to identify a great new CEO. We're fortunate to have Steve in his role until the new CEO assumes these duties," said Gates in a statement.

While the process to find a new CEO moves forward, concerns have been raised that "Gates' role as chairman effectively blocks the adoption of new strategies and would limit the power of a new chief executive to make substantial changes," said the report. Ford Motor Co.'s CEO Alan Mulally is widely rumored to be the front runner to become Microsoft's next CEO, although he has officially made no indication that he's interested in the post.

The investors' concerns are well-founded, according to J. Gold Associates analyst Jack E. Gold. "My opinion (and perhaps those that want Gates out) is that as long as Gates and Ballmer have essentially veto power over the selection process (since between them they control a large portion of the shares and have control over the board), that not much will change and the replacement will be cut from the same cloth, so to speak," Gold said in a note to eWEEK.

"If you eliminate the existing chair and limit the influence of Ballmer on the selection process, you're more likely to get someone that can take MSFT in a needed new direction," added Gold.

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...