Microsoft's CEO search rattles boardrooms

[MICHIGAN] It wasn't long after Ericsson chief executive officer Hans Vestberg was identified as a contender for the top job at Microsoft Corp before phones were ringing off the hook at the telecom supplier's Stockholm offices.

The Jan 15 revelation was the main topic in at least one hastily convened meeting the next morning, according to a person who attended and isn't allowed to speak publicly on the matter.

A Stockholm-based senior engineer said that he scanned headlines first thing that day and was shocked by the news, even as he took pride in the prospect of Mr Vestberg running Microsoft. The candidacy is likely to be discussed at an Ericsson board meeting before the end of the month, another person said.

Mr Vestberg joins a growing list of executives whose staff were jolted by news that their boss is being wooed by another company - in this case, to succeed Microsoft's Steve Ballmer. Alan Mulally of Ford Motor Co and Ebay Inc's John Donahoe have also been tipped for the job in recent months.

Such exposure can cause frustration in the executive suite and confusion in employee ranks, diverting energy from the day- to-day execution of business. It might result in infighting among deputies seeking to fill a void left by the departing or distracted executive. To board members, it can also seem like their CEO has been double-dealing.

"The process of finding a new CEO at Microsoft is dragging out too long," said Bill George, a Harvard Business School professor who's on the boards of Goldman Sachs Group Inc and Exxon Mobil Corp. "It's become unseemly to have these candidates exposed without any closure."

Peter Wootton, a spokesman for Microsoft, and Ola Rembe, a spokesman for Ericsson, declined to comment.

"When names start showing up in the press, it instantly creates trust issues," said Ron Lumbra, co-leader of the CEO and board-services practice for the recruiting firm Russell Reynolds Associates in New York.

Other executives who have been the subject of reports they're in the crosshairs of another company include Hewlett-Packard Co's Meg Whitman, Oracle Corp's Mark Hurd and Foot Locker Inc CEO Ken Hicks.

"It's an awkward and inelegant moment for the CEO," said Jeff Sonnenfeld, senior associate dean at the Yale School of Management in New Haven, Connecticut. "The relationship is always going to be a little different after that. The board, if they are surprised, might have some trust issues."

Ford directors were frustrated last month when Mr Mulally's candidacy at Microsoft distracted from the global debut of the automaker's redesigned Mustang sports car, according to a person briefed on the matter. Mr Mulally, 68, had said last year that he would remain at Ford at least through 2014.

Less than a week before Ford introduced a redesigned F-150 pickup at the Detroit auto show, Mr Mulally told the Associated Press that he wasn't going to Microsoft and had "no other plans to do anything other than serve Ford".

Directors urged him to clarify that he was staying at Ford once it became clear he was out of the running at Microsoft, the person said.

Questions over how soon Mr Mulally might leave had created the risk of a return to the executive infighting that characterised the pre-Mulally Ford. He cultivated a more collaborative culture at Ford, which had long been marred by backbiting and dysfunction.

"There was no change from our previously announced plans. Alan remains absolutely focused on continuing to make progress on our One Ford plan," Ford said.

Even when an offer isn't forthcoming, the individual revealed as a contender could benefit from the attention.

"Being named as a candidate may actually help the executive more than hurt," said Ron Robertson, a partner in the Ottawa, Canada, office of recruiter Boyden Global Executive Search. - Bloomberg