MANULIFE CUTS 700 JOBS AS PART OF TECH TRANSFORMATION.
The zero-tolerance era for workplace conduct has its biggest cautionary tale so far.
Computer chip giant Intel Corp. announced on Thursday the resignation of its chief executive officer over what it described as a “past consensual relationship” with a company employee. Intel in its statement said Brian Krzanich, a longtime executive who has been CEO since 2013, violated the company’s “non-fraternization” policy.
Krzanich isn’t the first corporate chief to be forced out over what is described as a consensual relationship with an employee, nor did CEOs only start losing their jobs over their workplace conduct in the #MeToo era. But Intel is most likely the biggest company so far to confront a CEO who violated the company’s code of conduct in this period of heightened scrutiny on behaviour that had been either openly excused or kept quiet in the past.
Boards are increasingly less tolerant of CEOs behaving badly. The number of CEOs fired for ethical lapses in the U.S. more than doubled in the five years spanning 2012 to 2016 compared with the previous five years, according to a study of 2,500 companies by consultant PwC. The data showed 14 CEOs were ousted for ethical lapses from 2012 to 2016 versus six the previous five years. The executives were ousted both for their own improper conduct or that of employees reporting to them.
Earlier this month, Guess Inc. co-founder Paul Marciano stepped down following a company investigation into allegations of sexual harassment and assault.
John Lasseter, co-founder of Pixar Animation Studios and Walt Disney’s animation chief, also recently said he was resigning over what he called “missteps” with employees.
Years before #MeToo, the CEO of Hewlett-Packard Co., Mark Hurd, was ousted following accusations of sexual harassment by a female contract worker. Hurd settled with the woman in 2010.
A consensual relationship doesn’t make Krzanich anything like Harvey Weinstein or the casino mogul Steve Wynn, but it’s still not appropriate for the boss to have intimate relationships with subordinates. Intel’s experience is a warning to executives and to boards of directors that there is a higher standard now, and their employees and the outside world won’t accept conduct as usual.
Intel and Krzanich personally had been leaders in pushing to increase the numbers of women and underrepresented minorities in the technology industry. Given Krzanich’s role as prominent champion for women in the workplace, it was all the more necessary for his personal behaviour to be above reproach.
Intel shareholders weren’t immediately alarmed by the CEO’s resignation. Shares rose about 2 per cent initially after the news of Krzanich’s departure before retreating later.
The initial positive share reaction may have been due to Intel’s statement along with the resignation disclosure that it expects stronger financial results than its guidance indicated in April. Intel said then that it expected revenue for the second quarter to be US$16.3 billion, plus or minus $500 million, and earnings of US85 cents a share, plus or minus 5 cents. On Thursday, Intel said it expects revenue of about US$16.9 billion and adjusted earnings of US99 cents a share for the second quarter
But shareholders shouldn’t be so sanguine about the disclosure of Krzanich’s resignation. First, we’ve learned from these workplace behaviour tales that there may be more to the story than the company has disclosed so far. And second, this is a terrible time for Intel to have a leadership vacuum. (Chief Financial Officer Robert Swan was made interim CEO while the board searches for a permanent replacement, the company said in a statement Thursday.)
Intel is facing stronger challenges than ever to its cash-cow business of selling chips for the powerful computers in data centres. The company is also trying to plot its future, whether that lies in chips for self-driving cars, the next-generation of mobile internet standards known as 5G or other areas of computing.
Intel’s path is not clear, and it needs to quickly hire a top-flight CEO and ensure he or she hits the ground running. It doesn’t help that Intel wasn’t able to hold onto several company executives who would have made strong CEOs. Renée James, Intel’s former president under Krzanich, comes immediately to mind, as does Stacy Smith, who had been at Intel for 30 years until he left at the beginning of the year.
Intel had no choice but to push out its CEO once the company was confronted with his behaviour. But Intel could have done a better job planning for a future without its ousted leader.
Swan, the former chief financial officer of Ebay Inc., has been Intel’s CFO since October 2016. He oversees finance, information technology and corporate strategy. He previously was CEO of Webvan Group Inc.
Meanwhile, Krzanich’s ouster throws into turmoil the leadership of a company that’s been a model of stability and organization for 50 years.