Is the Microsoft Board Effective?

With the departure of two board members in early November, Microsoft’s board now has only six directors, a relatively small number compared with most other large companies. Now that cofounder Paul Allen and Hewlett-Packard Chairman Richard Hackborn have resigned, Microsoft’s board also contains a much smaller percentage of outsiders than other boards in the industry. Additionally, Allen has sold more than 102 million shares of Microsoft stock in 2000, representing more than one-third of his total stake in the company. Can Microsoft’s board of directors be as effective as before, especially now that Allen appears to be reducing his influence?

The Function of a Board

In a public company, the role of a board of directors is to ensure that executive decisions will benefit stockholders. As long as revenues and share prices meet or exceed shareholder expectations, the board usually enjoys shareholder support.

Signs of a bad board include the following:

• Infrequent or poorly attended meetings.