Microsoft board member says group is no rubber stamp

Microsoft’s board of directors has been under increasing scrutiny lately amid renewed calls for CEO Steve Ballmer to step down. So it was fascinating to see this Microsoft-produced video interview today with Charles Noski, a longtime member of the board. The piece doesn’t address the Ballmer question, but Noski provides an inside glimpse into the proceedings of the board and also into the general mindset of the group.

“We probably focus more time on, ‘Where do we need to respond? What do we need to do? Where should we be changing what we do?’ ” he explains toward the end of the video. “And of course our job as a board is not to make those specific decisions and to direct management to do all of these things.”

He continues, “But we’re a bit of a sounding board to challenge them, and to ask them to ask that next question and to think about that other alternative, and challenge them to come up with the best answer that will bring the most success to Microsoft. And it’s a pretty robust debate. And all of us, every one of the members of the board of directors, are engaged in that discussion.”

So how is Microsoft doing overall? Here’s what Noski says when asked that question.

We’re a really big company, and I think sometimes people look at smaller companies and say, gee, look at this big percentage growth, year over year. And if you’re very small, and you’re growing at a decent pace, those percentages sound pretty big. But if you think about how big Microsoft is, the fact that we’ve been able to grow — when I think back to the beginning of the last decade, we probably were doing about $25 billion in revenues.

We’re now up in the $60 to $70 billion in revenues. That’s a gigantic amount of growth for any company, whether in absolute terms or on a percentage basis. And so being as big as we are, if you’re going to grow 10 percent, that’s $6 billion a year. Think about how many companies aren’t $6 billion. And we’re going to grow a $6 billion company a year. That’s enormous. So in that context, I think we’ve done very well from a growth standpoint.

Having said that, there are some businesses where there’s great opportunity, where … we’re going to have a bigger and more compelling market position. That’s going to require us to innovate, to invest and to work harder than the competition to be successful. So we’ve done a good job, I give us a good grade. There’s a lot more to do, and we can do better.

Watch the full interview here.

  • http://www.facebook.com/keithcu Keith Curtis

    With an investment of 500 developers, Microsoft could offer the best Linux. http://keithcu.com/

    • Guest

      Great plan. Invest 500 developers so they can offer yet another free distro.

    • Guest

      Great plan. Invest 500 developers so they can offer yet another free distro.

  • Guest

    Thank you to Dr. Noski for clearing the air on Microsoft’s corporate governance. A lot of “armchair analysts” out there think they know what’s best for Washington’s #1 corporation, but those men lack the vision that has kept Microsoft at the top of the standings for decades.

  • Guest

    This just in: Microsoft’s legendary do-nothing board gives itself “a good grade.”

    This board is getting pretty close to being a business-school case study. The bad kind.

  • Guest

    This just in: Microsoft’s legendary do-nothing board gives itself “a good grade.”

    This board is getting pretty close to being a business-school case study. The bad kind.

  • Victor

    Just how much of that growth comes as a result of the overall industry? Is Microsoft’s growth keeping in pace with all the verticals it invests in? The answer has to be no. 

    Just for arguments sake, no one would have suggested that Exxon was a small company 10 years ago, and certainly no one would argue that Exxon is in a high growth industry. For a company that is almost 7 to 8 times bigger, Exxon has grown at roughly the same annual revenue growth rate as Microsoft in the last 10 years. Would anyone argue that Exxon is somehow out-innovating to accomplish those results?  I would hazard to guess no. Exxon and Microsoft  simply had the good fortune to be the biggest players at the right industry at the right time. So for the board members of Microsoft to pat on their own backs is a unseemly. 

    Let’s not even get into stock performances between the two.

  • Guest

    Another excellent example of why it’s not just Ballmer that has to be replaced, but MS’s entire board. Imagine another public company director concluding they’d done a “good” job when they’ve destroyed 50% of shareholder value since 2000 and taken the company from leader to laggard.  And listen to the same tired excuses: we’re too big to grow fast, we face a tough economy, new competitors have arisen, investing in new areas costs a lot of money and takes time. How come Apple is now larger than MS and growing at more than 7x the rate with no slowdown in site? Do we hear Jobs whining about how tough growth is when you get that big? Same with the slow economy. Again, we don’t hear Apple, or Google, or VMware hiding behind that excuse, even though they face the same headwinds.

    He implies that others are manipulating their stocks for short term gains and not investing for the future, unlike MS. Only nobody has invested more attempting to manipulate their stock than MS has (approx. $100B of buybacks). It just hasn’t worked. And again, how is that Google and Apple (as well as others) didn’t just dominate this past decade, but are dominating the present and appear to be better positioned for the future overall than MS? Doesn’t sound like they failed to invest for the future. It just seems they managed to do a much better job of it and at a fraction of what MS has spent on annual R&D and other failed projects.

    He talks about how MS’s investments are big and expensive. He cites search and mobile. Why have MS’s costs been so high in both? Could it be because they responded so late in the former (and without any real plan) and blew a decade head start in the latter through incompetence and arrogance? How come Apple has been able to enter both mobile search and mobile and, in under a year, managed to be successful and profitable in both? Actually in mobile, successful and profitable doesn’t begin to describe it. iPhone now supplies more than 60% of their revenue and profits and allowed them to easily sail past MS on total revenue, total profit, and market capitalization. Not bad for a product that, according to Ballmer at least, few would buy.

    He says one of the board’s main focus areas is strategy. Yet clearly MS’s strategy has been far less successful from a growth and industry relevance point of view than Apple or Google’s. And even Oracle has managed to grow profits more effectively over the decade, as well as increase their stock price.

    MS stock has gone nowhere except down under Ballmer because he, assisted by the board, has made extremely costly new investments that have failed to pay off, while simultaneously losing ground in many legacy areas, often due to internal incompetence or weak products. 

    The sooner shareholders have a CEO and board in place who acknowledge that and are prepared to start addressing it, the better off they and the company will be.

  • Joe the coder

    There should be a sign over the board room at MS – Now serving: ourselves.

    Any board that has watched several industry sea changes and not prodded the CEO to move aggressively or replaced him is clearly derelict in their duties.  If everything is wonderful, why do google and apple have the mantels of leadership now?

    • Joe the coder

      Oh, yeah, how about loosening the purse strings and bump up the dividend?  It’s not like the money is doing much good right now.  Reward those that have remained as investors.

    • Guest

      Still serving – ourselves. 

      Fixed it for you. As they have been since at least 2003. 

  • Bob

    In the time that Noski has served, MS has lost its revenue, profit, and market cap leads,  the portable music, mobile, and tablet markets, 50% of the browser market, 10% of the desktop OS market, and its position as *the* most important company in technology. The company who has trumped it in every one of those areas, Apple, has done all of it with 1/3 the employees and while spending 1/10th as much on R&D. 

    If Noski thinks that’s a good performance, I’d hate to see his idea of a bad one.Microsoft’s board is as embarrassing as their CEO. In fact, I really can’t think of a board that has been more derelict in its duties to shareholders.

  • Thishorseisdying

    “We probably focus more time on, ‘Where do we need to respond?”
    Hence the reason MS has become a perpetual laggard. Others, like Apple, have focused on “What can we disrupt next?” They leave the responding (years later) to MS.

  • Guest

    In other news, Apple searches for a second manufacturer to meet iPad demand.

  • Guest

    In other news, Apple searches for a second manufacturer to meet iPad demand.

  • Anonymous

    If you even just use the Microsoft grading system adopted for employees performance reviews to measure both Ballmer’s and the Board of Directors performance, here is what it would look like for the past 10 years:

    Peformance on understanding and predicting the importance of web search: insufficient
    Performance on predicting the advent of NetBooks: insufficient (remember that Vista never took that into account and the ancient XP had to be hecked out in order to be able to run on NetBooks, but this only after they lost the relationship with HP that was screaming for a product to run their NetBooks…)
    Peformance on delivering a viable new OS to replace XP (Vista): insufficient
    Performance on being able to understanding and predicting the importance of smartphones: insufficient
    Performance on being able to understand and predict the importance of Tablet sized PCs for the consumer market: insufficient.

    Morale of the story, any employee at Microsoft who had missed the mark on so many key strategic objectives would be out the door within 24 hours, escorted out by security.

    What the company lacks is vision. Ballmer works hard and he is committed. Who can argue otherwise ? But he lacks the vision that’s needed to give Microsoft the growth boost in needs.