The Boardroom Shuffle Is All About Vision

By Trevor Gilbert , written on February 7, 2012

From The News Desk

When a large company starts to decline, the blame is often placed in two places: with the CEO and with the Board of Directors. Depending on whether the problem is seen as systemic or not, either the CEO will be kicked out by the Board, or the Board will be forced to resign by the shareholders.

What most people don't understand though, is that replacing the two are very different challenges*. To replace a CEO, all that is needed is a majority on the Board of Directors. To replace a Board of Directors, though, you need either immense pressure from the shareholders, or one brilliant CEO. This is why when a Board steps down en masse, it makes such big news.

In the aftermath of such a mass resignation, the CEO is given virtually unlimited power to reshape the company. Of course, there is still a nominal Board, but in a broader sense, the CEO is the man of hour. It would be like if the President was in charge and all of Congress stepped down at once. He is still bound by the law, but he also runs the entire company as he sees fit.

In such a situation, the most important characteristic of the CEO is their vision for the future. Of course, the most famous example of a mass resignation in recent history was when Steve Jobs pulled a board room coup at Apple. Having been brought in as an "advisor" to the company, then as an "interim" CEO, Jobs found the Board to be constraining his activities. So, doing what Jobs does best, he did the impossible. He forced the entire Board to resign, allowing him to take control of the company and molding the company to fit his vision for the future.

It ended up well for Apple, as Jobs had an excellent vision for the future, and the perfect team to help execute on that vision. If Jobs had been lacking in vision for Apple, the company would have surely faltered for a bit, and possibly continued its decline.

For an excellent example of a shuffle without vision, look no further than the recent changes at RIM. RIM has forced the co-CEOs to resign from their executive positions, while keeping Mike Lazeridis on the Board in an undefined role. As if this weak change wasn't bad enough, there was no change in vision for the company. Instead, the company plans on continuing the failed policies of the last leader (policies which have proven to be horrible, as seen by RIM's stock price).

Now, this recap of recent history is nice, but especially important in the light of today's events. Today, Yahoo announced that their Board of Directors would be restructured, and that the Chairman and three other members of the Board will be stepping down. Although they will soon be replaced, it is safe to say that CEO Scott Thompson now has control of the company (whether he wants it or not).

This could end up being the best thing to happen to Yahoo in years. On the other hand, this could end up being the worst thing to happen to Yahoo since they didn't buy Google years ago. The one thing that will be an indicator of this is the product vision of Thompson. Thompson is very much so an unknown in the executive world, and he may have an amazing vision for the future of Yahoo, or he may not.

This isn't like Steve Jobs, where everyone knew he had a vision for the future, like it or not. Thompson could end up being anywhere from Steve Jobs to Steve Ballmer, and Yahoo will end up reflecting this is in the years to come. That is why the vision is so important in the end, because when a company loses its leadership, it begins to reflect whatever leadership is left. Of course, this could all be for naught and Thompson could be replaced tomorrow a la HP. Then all bets are off.

*To be clear, these are the general rules followed at most companies. Obviously, some random company could hold themselves to different rules. This does not apply to those companies.