Throwing the Board Overboard

Sometimes the board has to go in order for the company to move forward and flourish.

There are several notable examples of companies where the board of directors was at the core of the problem, and once the board members were changed or replaced, the companies were able to turn around and thrive. Here are a few of the most prominent cases:

Apple (1997)

• The Problem:In the mid-90s, Apple was struggling with stagnating products, loss of market share, and internal confusion about the company’s direction. The board was part of the issue; they were hesitant to make bold changes and were often more concerned with short-term financial goals than long-term innovation.
• The Change:In 1997, Steve Jobs returned to Apple after a decade-long absence. The board of directors at that time made the bold decision to bring Jobs back, even though his previous departure had been tumultuous. Jobs quickly reshaped Apple’s culture, refocused the company on innovation, and drove product development for iconic products like the iMac, iPod, iPhone, and iPad.
• The Outcome:After Jobs returned and many of the board members were replaced or sidelined, Apple transformed from a struggling company near bankruptcy into one of the most valuable and innovative companies in the world.

IBM (1990s)

• The Problem:By the mid-90s, IBM was facing a crisis. The company’s board and leadership were resistant to changing the company’s traditional hardware-focused business model. The market was shifting toward software and services, but IBM was slow to adapt.
• The Change:In 1993, Lou Gerstner was brought in as CEO, despite his lack of technical background. His appointment was a bold move, given that IBM’s board had been mostly comprised of executives with a deep technical focus who were wedded to traditional ways of doing business.
• The Outcome:Gerstner made critical changes to IBM’s culture and business strategy, shifting the focus from hardware to services and software. He also pushed for a much more efficient global organization. Under Gerstner’s leadership and the restructuring of the board, IBM turned around, eventually becoming a leader in IT services with massive success in consulting and cloud computing.

Ford (2006)

• The Problem:In the mid-2000s, Ford was struggling financially, losing market share, and facing a major crisis in the automotive industry. The board of directors at that time had been out of touch with market trends, and there was a general failure to innovate and respond to consumer demands for more fuel-efficient vehicles.
• The Change:In 2006, Ford brought in Alan Mulally from Boeing as CEO. One of his first moves was to revamp the board, replacing several long-standing members and pushing for greater alignment and accountability. Mulally also focused on creating a clear, unified vision for the company, and he pushed for greater focus on quality, innovation, and sustainability.
• The Outcome:Under Mulally’s leadership and a revamped board, Ford was able to turn around its fortunes, even avoiding a government bailout during the 2008 financial crisis. The company refocused on improving its product lineup and embraced more energy-efficient vehicles, making it more competitive.

Yahoo! (2008-2009)

• The Problem:Yahoo! was struggling to compete with Google in the search and advertising markets, and the company had been through a series of leadership changes. The board was often criticized for its lack of vision and inability to make decisive moves. This resulted in a series of failed acquisitions and missed opportunities.
• The Change:In 2009, after a series of board issues, Yahoo! replaced its CEO, Jerry Yang, and brought in Carol Bartz. Although Bartz’s tenure had mixed results, a key shift occurred with the replacement of several board members. The board had been out of sync with the needs of the company, and the new leadership team worked to restructure Yahoo!’s business model and refocus on its core strengths in media and advertising.
• The Outcome:While Yahoo! was eventually sold to Verizon in 2017, the early stages of Bartz’s leadership, along with changes to the board, marked a period of renewed focus on Yahoo!’s core digital media business, rather than trying to be a Google or Facebook competitor. The board changes set the stage for the eventual sale of Yahoo!’s core assets at a higher valuation than previously thought possible.

Chrysler (2009)

• The Problem:Chrysler was in financial disarray during the 2008-2009 economic crisis. The company had experienced a series of missteps, including over-investment in trucks and SUVs at a time when consumer preferences were shifting toward smaller, more fuel-efficient cars. The board was blamed for its lack of direction and poor oversight.
• The Change:In 2009, Chrysler received a bailout from the U.S. government, which required significant changes to its leadership and board. Fiat’s CEO, Sergio Marchionne, took control of Chrysler and played a pivotal role in restructuring the company. As part of the restructuring, many board members were replaced, and Marchionne aligned the company around a new vision of global collaboration with Fiat.
• The Outcome:Under Marchionne’s leadership and the new board structure, Chrysler turned itself around. Fiat-Chrysler became one of the more successful automotive alliances of the decade, eventually merging with PSA Group to form Stellantis.

Tesla (2008-2010)

• The Problem:Tesla was on the brink of collapse in 2008 and 2009, due to the global financial crisis, production delays, and challenges in raising capital. The company was bleeding money and was at risk of going under, with many critics questioning the leadership and board’s ability to execute the vision of a sustainable electric car company.
• The Change:The turning point came when Tesla’s board, under the leadership of Elon Musk, took bold steps to keep the company afloat. Musk not only injected his own money into the company but also worked closely with the board to refocus the strategy and streamline operations. He also became the de facto leader and vision-driver, despite earlier concerns about his leadership style.
• The Outcome:Tesla not only survived the crisis but went on to revolutionize the electric vehicle industry. While the board remained supportive of Musk, many of the initial board members were replaced as the company grew, with more experienced individuals being brought in to help with the scale-up.

Netflix (2000-2002)

• The Problem:In the early 2000s, Netflix was struggling against much larger competitors like Blockbuster and Hollywood Video. The company’s board of directors was criticized for its failure to quickly pivot to a more scalable business model and for being resistant to new technologies like streaming.
• The Change:In 2002, Reed Hastings, the co-founder and CEO, made a decision to change the company’s business model entirely. The board, which had originally been focused on DVD rentals, had to be convinced to make the leap to streaming. The decision to move away from the DVD rental model, combined with changes to the board, was a pivotal moment.
• The Outcome:The shift to streaming, combined with the hiring of key executives, allowed Netflix to become the dominant player in the entertainment space. The company’s stock exploded, and Netflix’s model was soon copied by many others, making it one of the most successful media companies in the world.

Conclusion

In these cases, the boards of directors were often too conservative, outdated, or disconnected from the needs of the business. In each case, the companies experienced significant challenges and were ultimately saved by leadership changes that often involved replacing board members, re-aligning leadership, and adopting bold, visionary strategies. When these boards were “thrown overboard,” the companies were able to innovate and thrive, sometimes leading to complete transformations in their industries.

Paul Fioravanti, MBA, MPA, CTP, is the CEO & Managing Partner of QORVAL Partners, LLC, a FL-based advisory firm (founded 1996 by Jim Malone, six-time Fortune 100/500 CEO) Qorval is a US-based turnaround, restructuring, business optimization and interim management firm. Fioravanti is a proven turnaround CEO with experience in more than 90 situations in more than 40 industries. He earned his MBA and MPA from the University of Rhode Island and completed advanced post-master’s research in finance and marketing at Bryant University. He is a Certified Turnaround Professional and member of the Turnaround Management Association, the Private Directors Association, Association for Corporate Growth (ACG), Association of Merger & Acquisition Advisors (AM&MA), the American Bankruptcy Institute, and IMCUSA. Copyright 2024, Qorval Partners LLC and/or Paul Fioravanti, MBA, MPA, CTP. All rights reserved. No reproduction or redistribution without permission.

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