Revolt in the Boardroom: The New Rules of Power in Corporate America by Alan Murray

From the Publisher

Throughout the 20th century, American corporations were governed by autocratic, almost unaccountable chief executives. Their word was law and the only check on their power was a board of directors composed of their friends and allies.

Then, in a stunning reversal, a momentous series of firings deposed the heads of some of the world's best-known companies: AIG, Morgan Stanley, Boeing, Hewlett-Packard and Pfizer, just to name a few. Formerly unchallenged CEOs found themselves under fire, often from their own handpicked boards. The number of deposed executives is astonishing. In 2004, the leaders of 600 companies were asked to leave. That number more than doubled in 2005 and reached 1,400 companies in 2006.

Flexing new muscles, directors are assuming new and unfamiliar responsibilities. In Revolt in the Boardroom, Alan Murray reveals the inner workings of the new seat of power. Using the access afforded to him by his influential Wall Street Journal column, Murray tells the story of three seminal board revolts—the now-famous Hewlett-Packard drama, the ousting of Boeing's Harry Stonecipher and the end of the reign one of the world's most autocratic executives, Hank Greenberg at AIG.

Murray goes further to chart the history of the corporation, the rise of governance and the effects of the new power gained by outside institutions like hedge funds and interest groups. Through it all, Murray shows how the job of chief executive has rapidly and permanently changed. Leaders like A. G. Lafley and Jeff Immelt govern instead of rule, build alliances and support instead of dictating direction and pay careful attention to a broader range of stakeholders than ever before.

Revolt in the Boardroom is the first look at the new world of corporate power and the last word on the transformational events of the last two years.

Product Details

• Table of Contents
• Read an Excerpt
• Read a Sample Chapter

Table of Contents

Read an Excerpt

Chapter One

On Monday, January 10, 2005, Carly Fiorina sat at the very pinnacle of corporate power.

Since 1999, she had been chairman and chief executive of one of the world’s most storied technology companies, Hewlett-Packard, which employed 150,000 people and brought in revenues exceeding $80 billion a year—roughly the economic output of Nigeria.

She had doubled those revenues by engineering a controversial merger with Compaq Computer Corporation in 2002—a merger that had been contested publicly by Walter Hewlett, son of one of the company’s revered founders. It had been a grueling, vicious and highly personal battle for her.

But she had won.

In the process, Carly Fiorina had proven herself to be one of the most talented business leaders of her generation. She was charismatic and compelling—able to win the hearts and minds of audiences large or small. As one executive who worked with her at Lucent Technologies Inc. put it, "She could sell ice to Eskimos."

Because of that skill, she was now widely heralded as the most powerful woman in business. She traveled the world, giving hundreds of public speeches, and frequently graced the covers of business magazines. She made such an impression on the public consciousness that, in many business circles, she could be easily identified by one name alone.

She was Carly.

Her position and her power—like those of her colleagues at the very top of the corporate pyramid—in some ways rivaled the position and power of great rulers. At the turn ofthe century, CEOs were unconstrained by powerful ministers or legislators, unchallenged in meaningful elections, unencumbered by burdensome constitutional constraints, and usually unthreatened by rebellious underlings. The previous century had seen the flattening of political hierarchies throughout the world. But at the giant corporations that spanned the globe, controlled much of the world’s commerce and generated much of the world’s wealth, the CEO still sat on top of a clear hierarchy, and his or her strength and authority remained largely unchallenged.

CEOs’ pay mirrored that power. Fiorina brought home an annual paycheck that was 20 times that of President George Bush. In her leisure time, she cruised on her large, private yacht.

Particularly in the United States, CEOs like Fiorina were used to getting their way. Technically, they were appointed by, and reported to, their boards of directors. But many, like Fiorina, held the title of Chairman of the Board as well as Chief Executive. They set the board’s agenda and controlled much of the board’s access to information. They benefited from a business culture, developed during the 20th century, that held that strong, even autocratic, CEOs offered the best route to business success. The successful CEO wasn’t first among equals; the CEO was boss.

In Fiorina’s case, this position of power was particularly sweet because she was a woman. The ranks of corporate power, far more than the ranks of political power, had remained the province of men throughout the 20th century. When the elite members of the Business Council held their regular meetings, there were seldom more than one or two women in the crowded room—or for that matter, more than one or two African Americans. In recent years, a few prominent women, like Meg Whitman of eBay Inc. or Anne Mulcahy of Xerox Corporation or Andrea Jung of Avon Products, had broken through the glass ceiling and made it to the top. But at the beginning of 2005, those women were still scarce enough to be counted on the fingers of two hands. Among Fortune 500 companies, no more than 10 had female CEOs.

Testosterone ran particularly strong in the telecommunications world, where Fiorina made her career. In spite of its nickname, "Ma Bell" and her progeny were overwhelmingly male enterprises. As a young executive at Lucent, an offshoot of AT&T, she suffered the indignity of a boss who once introduced her as "our token bimbo." ("You will never do that to me again," she told him afterward.) She had once attended an all-male sales lunch at a club where scantily dressed women danced on the tops of tables. Her male colleagues had suggested she skip the lunch, which they had arranged, but she refused, arriving in her most serious-looking business attire. The dancers said they wouldn’t dance at the table "until the lady leaves." Later, when Lucent bought Ascend Communications—a company with a legendary cowboy culture—some at Ascend were critical of their new acquirers, saying the Lucent sales force "didn’t have any balls." Fiorina appeared onstage at the first joint sales meeting in cowboy boots and with a pair of her husband’s socks stuffed in the crotch of her pants, declaring to the stunned Ascend team, "Our balls are as big as anyone’s in this room."

But for Carly, that was all in the past. Now she sat where the men had sat before her. She enjoyed the pay and the perks and, most important, the power that came with the job of chairman of the board and chief executive officer of one of the world’s great corporations. She had triumphed in a man’s world.

Or so she thought.

But on January 10, 2005, that world was changing.

Without Fiorina’s knowledge, members of her board of directors had held a series of highly unusual telephone conversations in December and early January to discuss their dissatisfaction with her leadership.

The company certainly had its problems. Its stock was flagging—55 percent below where it had been when Carly took over in 1999. And it had failed to meet its financial projections for the third quarter of 2004, which ended July 31—prompting complaints from Wall Street analysts. Neither problem suggested crisis. All technology stocks were trading well below their breathless levels of 1999, and many companies occasionally missed their financial targets. Indeed, Fiorina liked to point out that before she took over, HP had missed Wall Street’s earnings expectations for nine quarters straight. Moreover, she had acted quickly to address the third quarter situation—firing three top sales executives whom she blamed for the miss, and coming up with a plan for moving forward.

Read a Sample Chapter

Chapter One

On Monday, January 10, 2005, Carly Fiorina sat at the very pinnacle of corporate power.

Since 1999, she had been chairman and chief executive of one of the world’s most storied technology companies, Hewlett-Packard, which employed 150,000 people and brought in revenues exceeding $80 billion a year—roughly the economic output of Nigeria.

She had doubled those revenues by engineering a controversial merger with Compaq Computer Corporation in 2002—a merger that had been contested publicly by Walter Hewlett, son of one of the company’s revered founders. It had been a grueling, vicious and highly personal battle for her.

But she had won.

In the process, Carly Fiorina had proven herself to be one of the most talented business leaders of her generation. She was charismatic and compelling—able to win the hearts and minds of audiences large or small. As one executive who worked with her at Lucent Technologies Inc. put it, "She could sell ice to Eskimos."

Because of that skill, she was now widely heralded as the most powerful woman in business. She traveled the world, giving hundreds of public speeches, and frequently graced the covers of business magazines. She made such an impression on the public consciousness that, in many business circles, she could be easily identified by one name alone.

She was Carly.

Her position and her power—like those of her colleagues at the very top of the corporate pyramid—in some ways rivaled the position and power of great rulers. At the turnof the century, CEOs were unconstrained by powerful ministers or legislators, unchallenged in meaningful elections, unencumbered by burdensome constitutional constraints, and usually unthreatened by rebellious underlings. The previous century had seen the flattening of political hierarchies throughout the world. But at the giant corporations that spanned the globe, controlled much of the world’s commerce and generated much of the world’s wealth, the CEO still sat on top of a clear hierarchy, and his or her strength and authority remained largely unchallenged.

CEOs’ pay mirrored that power. Fiorina brought home an annual paycheck that was 20 times that of President George Bush. In her leisure time, she cruised on her large, private yacht.

Particularly in the United States, CEOs like Fiorina were used to getting their way. Technically, they were appointed by, and reported to, their boards of directors. But many, like Fiorina, held the title of Chairman of the Board as well as Chief Executive. They set the board’s agenda and controlled much of the board’s access to information. They benefited from a business culture, developed during the 20th century, that held that strong, even autocratic, CEOs offered the best route to business success. The successful CEO wasn’t first among equals; the CEO was boss.

In Fiorina’s case, this position of power was particularly sweet because she was a woman. The ranks of corporate power, far more than the ranks of political power, had remained the province of men throughout the 20th century. When the elite members of the Business Council held their regular meetings, there were seldom more than one or two women in the crowded room—or for that matter, more than one or two African Americans. In recent years, a few prominent women, like Meg Whitman of eBay Inc. or Anne Mulcahy of Xerox Corporation or Andrea Jung of Avon Products, had broken through the glass ceiling and made it to the top. But at the beginning of 2005, those women were still scarce enough to be counted on the fingers of two hands. Among Fortune 500 companies, no more than 10 had female CEOs.

Testosterone ran particularly strong in the telecommunications world, where Fiorina made her career. In spite of its nickname, "Ma Bell" and her progeny were overwhelmingly male enterprises. As a young executive at Lucent, an offshoot of AT&T, she suffered the indignity of a boss who once introduced her as "our token bimbo." ("You will never do that to me again," she told him afterward.) She had once attended an all-male sales lunch at a club where scantily dressed women danced on the tops of tables. Her male colleagues had suggested she skip the lunch, which they had arranged, but she refused, arriving in her most serious-looking business attire. The dancers said they wouldn’t dance at the table "until the lady leaves." Later, when Lucent bought Ascend Communications—a company with a legendary cowboy culture—some at Ascend were critical of their new acquirers, saying the Lucent sales force "didn’t have any balls." Fiorina appeared onstage at the first joint sales meeting in cowboy boots and with a pair of her husband’s socks stuffed in the crotch of her pants, declaring to the stunned Ascend team, "Our balls are as big as anyone’s in this room."

But for Carly, that was all in the past. Now she sat where the men had sat before her. She enjoyed the pay and the perks and, most important, the power that came with the job of chairman of the board and chief executive officer of one of the world’s great corporations. She had triumphed in a man’s world.

Or so she thought.

But on January 10, 2005, that world was changing.

Without Fiorina’s knowledge, members of her board of directors had held a series of highly unusual telephone conversations in December and early January to discuss their dissatisfaction with her leadership.

The company certainly had its problems. Its stock was flagging—55 percent below where it had been when Carly took over in 1999. And it had failed to meet its financial projections for the third quarter of 2004, which ended July 31—prompting complaints from Wall Street analysts. Neither problem suggested crisis. All technology stocks were trading well below their breathless levels of 1999, and many companies occasionally missed their financial targets. Indeed, Fiorina liked to point out that before she took over, HP had missed Wall Street’s earnings expectations for nine quarters straight. Moreover, she had acted quickly to address the third quarter situation—firing three top sales executives whom she blamed for the miss, and coming up with a plan for moving forward.