Monday, October 6, 2003 - Page updated at 12:00 AM

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Inside the Boardroom: Chips off the big block

Seattle Times technology reporter

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After searching for more than a year for an overseas director who would reflect its "global, inclusive approach," the company last month increased the board size from eight to 10 members and brought on BMW executive Helmut Panke. Former AT&T exec Charles Noski also joined. The board includes three insiders: Chairman Bill Gates, Chief Executive Steve Ballmer and former President Jon Shirley. Another big name is Raymond Gilmartin, the chief executive of pharmaceutical giant Merck.

With only six directors, Amazon's board has been criticized as being too small. Those directors are serious movers and shakers, with ties to Microsoft, Google, Reader's Digest and video-game giant Electronic Arts. Founder Jeff Bezos maintains a tight grip on the company as chief executive and board chairman, but he doesn't sit on the compensation, nominating or audit committees. No director owns more than 1 percent of the company's stock except for Bezos, who, with nearly 27 percent of the shares, is's largest shareholder.

At his executive-search firm, Jim Herd receives requests to find directors and managers with specialized experience, whether it be financial management or operations.

Often, those requests call for someone with a Microsoft pedigree, too.

"The Microsoft brand name carries a lot of weight locally, nationally and internationally," said Herd of Herd Freed Hartz, which is currently helping a Boston technology startup find a Microsoft alum for its board.

"It opens doors that otherwise may not be opened and it adds instant credibility to a corporation."

Former Microsoft executives serve on the boards of nearly two dozen publicly traded Washington companies, from spinoff Expedia to the retailer Cutter & Buck. The connection ties the world's largest software company to more companies in the state than any other Washington-based company, according to Seattle Times analysis.

But while the Microsoft diaspora is vast, the weight of its influence appears to lie in the realm of smaller technology companies.

The only ex-Microsoft executives to serve on Fortune 500 company boards here are former senior vice president Patty Stonesifer, who sits on's board, and former chief operating officer Bob Herbold, who is a director of timber giant Weyerhaeuser.

Microsoft employees may be especially valuable to startups because they tend to have experience creating products and bringing technology to market — all hallmarks of a small company, said Pete Higgins, a former Microsoft executive who co-founded the early-stage investment firm Second Avenue Partners.

"What's the role of a board member of a small company?" he said. "Typically, it's (providing) experience. You try to help small companies not repeat mistakes that their predecessors have already made."

10,000 millionaires

Seattle developed into a vital incubator for high-technology in the past decade, partly due to its proximity to Microsoft and the ideas that flowed from its campus.

In the 1990s, Microsoft's employee stock-option program spawned an estimated 10,000 millionaires, according to regional economist Dick Conway. Many of those employees were too young to retire and went off to become — among other things — venture capitalists, angel investors and founders of their own technology startups.

In some instances, however, the legend preceded these former employees in the same way a rising tide lifts all boats.

A handful of former Microsoft executives raised large amounts of money for their startups based, in part, on the myth that their lineage conditioned them to see around corners.

Most of the companies fared no better than other startups; for the most part, they're gone.

Mark Anderson, a Friday Harbor, San Juan County, technology commentator, said the first wave of companies started by ex-Microsoft managers failed because those leaders didn't get the type of training one might receive at a General Electric or Hewlett-Packard — both companies with strong reputations for emphasizing leadership.

"That probably remains a problem," he said. "It is also a unique aspect to Microsoft, historically, that you were given a large amount of responsibility, but given no training."

Herbold, the ex-Microsoft COO who also is a director for Agilent Technologies, Cintas and First Mutual Bank, said it wasn't necessarily Microsoft but rather his 26 years at Proctor & Gamble that enables him to serve on larger corporate boards.

"I'm the unusual one here," he said of the Microsoft alumni that serve as directors. "All my consulting is with large, Fortune 100 companies, not with smaller companies."

University of Washington business professor Suresh Kotha said the strength of these Microsoft alumni lies in how many companies they have incubated and brought into the marketplace. Likewise, it will take time for their influence to spread into boards of all sizes.

"They produce a lot of senior-level managers at small companies," Kotha said. "As time goes on, these companies will grow larger and the talent pool will increase, too."

Tony Audino, a former Microsoft manager who founded Voyager Capital and the Microsoft Alumni Network, cautioned against painting a 50,000-person organization with a broad brush.

He said that it's easy to apply a lens that measures things in weeks, when the real measure is probably years away.

Culture carriers

Audino, however, conceded that these former employees may bring a bit of Microsoft's culture to these young technology boards, for better or for worse.

"Microsoft is an environment where people openly confront issues in a very knock-down, drag-out fashion, if you will," Audino said. "At the end of the day, no hard feelings. Certainly, that's the way it was when I was there."

In the case of the Boston startup, it requested a former Microsoft executive on its board because it needed someone with a deep knowledge about the company's strategy, plus the contacts to maneuver within.

"When an executive has been at Microsoft for a while and left under good terms, they still have an incredible working knowledge of the company and world-class connections," said Herd, the recruiter.

"Who wouldn't want to do business with a company that has $50 billion?"

Monica Soto Ouchi: 206-515-5632 or

Copyright © 2003 The Seattle Times Company


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